ORDER N0. X8022 APRROVE REVISED AIRRORT LEASE AGREEMENT On -this the c4-th day of March, 20@~, ~_~pon motion made by Commissianer-• Williams, seconded by Commissioner Baldwin, the Co~_~rt unanimously approved by a vote of 4-Q~-0, the revised Airport Lease Agreement with Kerrville Aviation, Inc., and a~_~thori~e Co~_~nty J~_idge to sign saiiie, contingent ~_~pan the lease doc~_~ment incl~_~ding a delineation of the partic~_~lars and the specifics and specifications of impr~avementa of the new hangar to be canstri_icted, and f~_irther contingent ~_~pon the favor^able approval of the Co~_~nty Attorney and the Ca~_~nty J~_~dge of the lease agr°eement in c{~_tes-tion, and also a review of the existing lease agreement on Lot ~ where the ~:~_~rrent F'.errville Aviation fixed-base operation is located. L~~ :~ COMMISSIONERS' COURT AGENDA REQUEST PLEASE FURNISH ONE ORIGINAL AND NINE COPIES OF THI5 REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT. MADE BY: Paul Knippel OFFICE: Director of Public Works, City of Kerrville MEETING DATE: March 24, 2003 TIME PREFERRED: 9:00 am SUBJECT: (PLEASE BE SPECIFIC) Revised airport lease agreement with Kerrville Aviation lnc. for lots 9 and 10 -Two changes have been made to the lease agreement that was originally presented to the Court on February 24, 2003. While the revised agreement also extends the lease of lots 4 and 10 (including the blue hangar) to 2033, the difference is that the airport will begin to collect rent on the blue hangar in 2010, instead of 2015 as originally presented. The revised lease also requires completion of the self service station within six months as opposed to the completion time of the self service station being tied to construction of a new hangar on lot 9. The concept of having the lease for lots 9 and 10 (S&S lease} coterminous with the lease for the FBO proper on lot 3 (KX Aviation lease) has been discussed. It should be stated that the KX lease contains options for two ten-year extensions. Assuming both options are realized, this puts the KX lease expiration date in 2033, which is coterminous with the proposed lease agreement for lots 9 and 10. EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON) NAME OF PERSON ADDRESSING THE COURT ESTIMATED LENGTH OF PRESENTATION: IF PERSONNEL MATTER -NAME OF EMPLOYEE: Paul Knippel 20 minutes Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chapter 551 and 552, Government Code, is as follows: Meeting scheduled for Mondays THI5 REQUEST RECEIVED BY: THIS REQUEST RECEIVED ON: 5:00 P.M. previous Tuesday. All Agenda Requests will be screened by the County Judge's Office to determine if adequate infornlation has been prepared for the Court's formal consideration and action at time of Court Meetings. Your cooperation will be appreciated and contribute towards you request being addressed at the earliest opportunity. See Agenda Request Rules Adopted by Commissioners' Court. Memorandum Date: March 20, 2003 To: Kerr County Commissioner's Court Copy: Ron Patterson, City Manager From: Paul Knippel, Director of Public Works ~~. Re: Airport Lease with Kerrville Aviation, hic. Gentlemen: Attached hereto are five items. The first is a letter from Joe Kennedy requesting particular changes to the lease and requesting that this matter be placed before the Court for consideration and action at the March 23, 2003 meeting. The second item is a spreadsheet indicating an analysis of revenue that may result from execution of the lease. This analysis applies only to the FBO operation on lots 9 and 10. There are a number of assumptions built in to the analysis and any particular item could be debated. The point of the exercise however is to demonstrate quantitative value of the proposed lease by a) identifying the different revenue sources and b) providing a dollar amount indication of at least part of the overall impact to the local economy over the life of the lease. The farthest right hand columns on the spreadsheet indicate anticipated revenue totals from execution of the proposed lease as opposed to not executing the lease and relying only on rental income from the blue hangar. The next three items attached hereto are the lease documents themselves, in their final form and ready for execution. It is my understanding that Mr. Kennedy has spoken with several of you since the last meeting. In addition, Ron Patterson and I have met with Judge Tinley and Commissioner Williams regarding this subject. With these meetings having been held, and the information provided in the agenda request and the attached letter from Joe Kennedy, it is my hope that all members of the Court have been exposed to enough information to feel comfortable in making decisions regarding the proposed lease. Local impact Revenue Analysis for Lots 8 and 10 Revised March 20, 2003 (ails documan is fw economic analysis tMly and ehoultl na De used to determine actual lease rataa or tees) ear Blue Land Lease Hangar Personal Rate Rental Property ISlacre) (Elmonth) Value Parts Hangar Sales Value I Iilyear) Fuel Flowage Fuel Flowage Fee Rate Selt Serve tSlgap (galimo) 2003 S 132 S 1,600 S 100,000 S 40,000 E 150,000 S 0.050 500 2004 S 138 S 1,854 E 100,000 $ 40,000 $ 153,000 S 0.055 500 2005 S 140 S 1,910 E 102,000 S 40,000 E 156,060 E 0.060 500 2006 S 144 S 1,987 E 104,040 S 340,000 S 159,181 S 0.065 510 2007 S 149 E 2,026 S 106,121 E 340,000 E 182,65 S 0.070 520 2006 S 153 S 2,087 S 106,243 E 340,000 S 165,812 S 0.075 531 2009 S 158 S 2,149 E 110,408 E 340.000 E 768,924 S 0.080 541 2010 S 183 E 2,214 E 112,616 E 340,000 E 172,303 S 0.060 552 2011 E 167 S 2,280 E 114,869 E 340,000 S 175,749 E 0.080 563 2012 S 173 S 2,349 $ 117,166 $ 340,000 S 179,264 S D.O80 574 2013 S 178 E 2,419 S 119,509 S 340,000 E 182,849 E 0.080 58fi 2014 S 183 S 2,492 S 121,899 S 340,000 E 186,508 E D.O80 598 2015 S 189 S 2,586 S 124,337 E 300,000 S 190,238 S 0.080 609 2016 E 194 E 2,643 E 126,824 E 300,000 S 194,041 S 0.080 622 2017 $ 200 E 2,723 S 129,361 E 300,000 S 197,922 S 0.080 634 2018 S 206 S 2,804 S 131,948 S 300,000 S 201,880 S 0.060 647 2019 S 212 S 2,888 E 134,587 S 300,000 S 205,918 S 0,060 660 2020 S 219 S 2,975 E 137,279 $ 300,000 S 210,038 E 0.080 673 2021 S 225 S 3,064 $ 140,024 E 300,000 E 214,237 S 0.080 686 2022 S 232 E 3,156 E 142,825 S 300,000 E 218,522 E 0,080 700 2023 S 239 S 3,251 E 145,681 S 300,000 S 222,892 E 0.080 714 2024 S 246 S 3,349 $ 148,595 E 300,000 E 227,350 E D.O80 726 2025 S 253 S 3,449 b 151,587 S 300,000 E 231,897 S 0.080 743 2026 S 261 $ 3,552 E 154,598 f 300,000 S 238,535 E 0.080 758 2027 S 269 S 3,659 E 157,890 E 300.000 S 241,286 E 0,060 773 2028 S 277 S 3,789 E 180,844 S 300,000 S 248,091 S 0.080 788 2029 S 285 E 3,882 E 184,061 E 300,000 S 251,013 E 0.080 804 2030 S 294 S 3,998 E 167,342 S 300,000 E 256,033 S 0.080 820 2031 S 303 S 4,118 S 170,669 S 300,000 S 281,154 S 0.080 837 2032 S 312 S 4,242 E 174,102 S 300,000 S 288,377 E 0.080 653 2033 S 321 S 4,369 S 177,584 S 300,000 S 271,704 E 0.080 871 Subtotals Blue Hangar Land Rental Property Lease (30.1b/s.f.) Tax S ear S ear El ea Annual Fuel fee hom Fuel Fee Total Sales addl planes in from self Income Tax new hangar serve depot KV Aviation ear SI ear S1 ear Lease Blue Hangar Rental Only Scenario A SO.151s.f. $ 3,919 S 1,277 S 3,000 S 6,196 S 4,037 S 1,277 S 3,060 S 330 $ 8,703 E 4,158 S 1,295 f 3,121 S 4,320 $ 360 S 13,254 E 22,915 S 3,485 S 4,049 E 3,164 E 4,660 S 398 § 15,795 $ 23,603 E 3,589 S 4,068 S 3,247 S 5,040 S 437 $ 16,382 E 24,311 E 3,897 E 4,088 S 3,312 S 8,100 S 478 $ 19,674 E 25,040 E 3,806 $ 4,107 $ 3,378 S 8,640 E 520 $ 20.453 $ 25,792 S 3,922 S 4,127 E 3,446 E 8,640 E 530 $ 20 666 $ 28,565 E 4,040 S 8,000 E 4,148 $ 3,515 S 8,640 S 541 $ 26,883 $ 27,362 S 4,181 S 9,000 E 4,169 E 3,505 S B,fi40 S 551 $ 30,107 $ 28,1 B3 E 4,286 S 12,000 $ 4,190 $ 3,&57 S 8,640 S 562 $ 33,336 $ 29,029 S 4,415 E 15,1700 $ 4,212 S 3,730 E 8,640 E 574 S 36,570 $ 29,899 S 4,547 $ 18,000 E 3,870 S 3,805 E 8,640 E 585 $ 39,446 $ 30,798 E 4,683 S 31,720 S 3,692 S 3,881 S 8,640 E 597 $ 53,414 $ 31,720 S 4,824 S 32,672 S 3,915 $ 3,958 S 8,640 E 609 $ 54,618 $ 32,672 E 4,969 S 33.652 S 3,939 $ 4,038 S 8,640 $ 621 $ 55,856 $ 33,652 E 5,118 S 34,662 S 3,963 $ 4,118 S 8,640 E 833 $ 57,134 $ 34,662 E 5,271 S 35,702 S 3,988 E 4,201 E 8,640 S 846 S 58,447 $ 35,702 S 5,429 S 38,773 E 4,013 S 4,265 E 8,640 S 859 $ 59,798 $ 36,773 S 5,592 S 37,876 $ 4,038 5 4,370 E 8,640 E 872 S 61,189 $ 37,876 E 5,760 S 39,012 E 4,084 S 4,458 E 8,640 E 888 E 62,620 $ 39,012 S 5,933 S 40,162 S 4,091 $ 4,547 $ 8,840 S 699 $ 84,092 $ 40,182 S 8,111 E 41,388 S 4,118 S 4,838 E 6,640 S 713 E 65,808 $ 41,388 S 6,294 E 42,629 S 4,145 E 4,731 S 8,640 S 728 $ 67,167 S 42,629 S 6,483 S 43,908 E 4,174 S 4,825 S 8,840 E 742 S 68,772 $ 43,908 f 6,677 S 48,226 E 4,202 S 4,922 S 8,640 $ 757 E 70,424 $ 45,226 E 8,878 S 48,582 E 4,232 E 5,020 E 6,840 S 772 E 72,124 S 48,582 S 7,084 S 47,980 S 4,262 $ 5,121 E 8,640 S 787 S 73,874 S 47,980 E 7,297 $ 49,419 S 4,292 $ 5,223 S 8,640 S 803 $ 75,674 $ 49,419 S 7,515 $ 50,902 S 4,323 S 5,328 S 8,840 S 819 S 77,527 S 50,902 E 7,741 E 52,429 S 4,355 S 5,434 S 8,840 S 836 S 79,435 E 52,429 S 161,721 S 002,714 S 118,867 S 127,178 S 236,140 S 18,644 S 1,487,241 S 1,078,218 Land lean (2003 to 2005) is based on base rate of 3132.22 per acre (or 2.47 acres (lot 9 ~ 1.15 ac, lot i D = 1.32 ac) and adjusted by assumed CPI increase o} 3.0% annualy (2006 to 2033) is based on a total acreage 012.01 (lot 9 = 0.89 ac, bt 10 = 1.32 ac), reftecting release of portion of lot 9 upon completkn of new hangar Hangar Rental Rental of blue hangar based on base rate of 50.15/sf far 120' x 100' hangar, rent increased th' 3.0% annually. Hangar Value For purpose of calculating property tax associated with hangar ownership, blue hangar is assumed to have constant assessed value of E40,000 through 2015 and new hangar to be constructed on lot 9 Is assumed to have a constant assessed value of 5300,800 throughout the tens of the lease. Property Taz Based on 3100,000 of taxable personal property increased annualty by 2%, Property tax rate only Includes 50.3487 for Kerr Co. and $0.5632 far City, auurned to be constant over 30 year period. Sales Tax Aircraft pans that are sold in maintenance operation are subject to salsa tax. Includes onty 0.50% for Kerr Co. and 2.00% for Cily. Assumed growth of 2%annualty. Fuel Fee Additional Iuei flowage fee paid to airport as a resu0 of aircraft being stored in new hangar to be constructed on lot 9. Assumes 6000 gaVmoMh for 2005 through 2007 (tor 2.planes); assumes 9000 ga lmonth for 2008 through 2033 (far 4 planes). Add'dional fuel ftow•age lea paid to airport as a resu8 of seN serve depot insla8ation. Assumed 4% growth annualty. Please be aware that City staff is committed to improving our communication with the Court. Specifically, on subsequent issues you may expect to see a staff member at least once before any particular item relating to airport business is brought before the Court. You may contact me at 792-8325 if you wish to further discuss the lease documents or any other airport business. Thank you. 03/18/2003 13:48 8308967289 DON PAGE 02 tits'" ~ex~ ~~~ Cp ~ unt EAA!//L1E' V/AT/ON Mr. Paul Knipple, Directoz of Public .works City of Kezrvil.le 800 Junction Hwy. Kerrville, TX 78028 March I8, 2003 Dear Paul, As per ow discussion last week,l have spoken with some of the commissioners and believe that I have an understanding of the concerns expressed by the Commissioners Court I do feel that the terms of the new lease in its current form, as City Council approved it, are a good deal for the airport and all related parties. However, it seems that in the interest of expediting this process we could gain the approval of the court, if Kerr. villa Aviation were to make further concessions with regard to the lease terms. We are willing to make the following changes to the leases. 1. Chafe the time requiret~ient fnr completion oI'the self service station to six . months from the date the lease signing. 2. Add language in the lease to reflect the payment of $500.00 per month izt year 2010 for the blue hangar with annual increases over the following five (5) years to reach $1500.00 per month in year 2015. ' if it is possible, we would. like to get this vn the Commissioners Court agenda for the . IVlarclt. 23 meeting. Please call if you have any questions or comments. 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Y ; 76 u ° N N N N N N N N N N N N N M N M N M N M M N M N N N N M M P x 1 ~ ~y y• N( J CD N f J ~ . 1+ OfOJ NA W N~01 O 00 V O Q D ~ ~ U NA~N y N ~~ ~'J ~p~C j 7.~C C y n +e y ( q ~y V ~~ ~O ~ Q y [. j p ? y Q ~ Q Q Q ~r`S. N~N~~m 1OmNNQfJng~~~~~7KR~i~ Gi ~S'~P _ 's ~~ ~~ t n N a O m O SIXTH LEASE ADDENDUM KX AVIATION LEASE This KX Aviation Lease Addendum is entered into by and between JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, as "Lessee", and THE KERRVILLE-KERB COUNTY AIRPORT BOARD ("Board"), THE CITY OF KERRVII.,LE, a home rule city ("City") and THE COUNTY OF KERB, a political subdivision of the State of Texas ("County"). The Board, City and County herein collectively referred to as "Lessor". A. Lessor and Lessee are parties to a Lease dated August 4, 1983, which has been amended and with respect to which various addenda have been entered into, as evidenced by First Amendment to Lease Agreement dated November 14, 1983; by KX Aviation Lease -Second Amendment dated October 29, 1984; by KX Aviation Lease -Third Amendment dated November 29, 1984; by Fourth Lease Addendum (1986) dated July I5, 1986; and by Fifth Lease Addendum (198'7) R. R. Woodward Enterprises, Inc./City-County dated August 3, 1987; all of which are herein collectively referred to as the "Lease". B. The Lessee is the current lessee under the Lease. C. The parties desire to enter into this Agreement with respect to certain provisions of the Lease upon and subject to the terms and provisions herein set forth. NOW, THEREFORE, for and in consideration of the terms and provisions herein set forth and the mutual benefits to be derived herefrom and the mutual obligations to be created herby, Lessor and Lessee agree as follows: With respect to fuel flowage fees as set forth in paragraph 33 of the Lease it is agreed that the fuel flowage fees shall be reasonable in comparison with fuel flowage fees charged by other airports of similar size within the State of Texas. The fuel flowage fees used shall be subject to review every 180 days. In the event of any dispute, disagreement, controversy or claim arising out of, or related to, the fuel flowage fee charged by Lessor, the parties agree that such dispute, disagreement, controversy or claim shall be determined by binding arbitration under the commercial arbitration rules of the American Arbitration Association (but not using the services of nor an arbitrator named by the American Arbitration Association), which shall be commenced at any time by either party by filing a demand for arbitration upon the other party or parties. The arbitrator shall be selected by the mutual approval of the parties and if no mutual approval is achieved within thirty (30) days, any party may petition a District Judge sitting in Kerr County, Texas, to appoint such arbitrator. The decision of the arbitrator shall be final and binding on all parties. The statute of limitations, estoppel, waiver, laches and similar doctrines which would otherwise be applicable in any action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. All costs for the arbitration shall be equally borne by the parties. 2. The mandatory services required in the Lease to be provided by Lessee shall also include airframe and power plant repair. 3. All of the provisions of the Lease shall remain in full force and effect except only as provided herein. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be legally executed in duplicate this day of , 2003. LESSOR: KERRVILLE-KERB COUNTYAIRPORT BOARD By: Dr. John Davis, Chair, Airport Board APPROVED: CITY OF KERRVILLE By: Stephen P. Fine,. Mayor ATTEST: Brenda G. Craig, City Clerk APPROVED AS TO FORM: Michael C. Hayes, City Attorney LESSEE: JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, By JLK MANAGEMENT, L.L.C., a Texas limited liability company By: Joseph L. Kennedy, Jr., President APPROVED AS TO FORM: r--- . / ~ .,/' David M. M ey, County Attorney 2 COUNTY OF KERB, TEXAS THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this day of 2003 by Dr. John Davis, Chair, Kerrville-Kerr County Airport Boazd, for the KERRVILLE-KERB COUNTY AIRPORT BOARD, on behalf of said BOARD. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this ~3 day of `j c~~J C-" 2003 by PAT TINLEY, County Judge, for COUNTY OF KERB, TEXAS, on behalf of said COUNTY OF KERB, TEXAS. •.....- j ; ~,~:!~I~. HEIENA HANNA • . • NOTARY PUBLIC '••'~~~• ~"""~ ~~ 06-~-~ Notary Public, State of Texas •..... THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this day of 2003 by STEPHEN P. FINE, Mayor of the CITY OF KERRVII...LE, TEXAS, on behalf of said CITY OF KERRVII.LE, TEXAS. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this day of 2003 by JOSEPH L. KENNEDY, JR., President of JLK MANAGEMENT, L.L.C., a Texas limited liability company, General Partner of JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, on behalf of said partnership. Notary Public, State of Texas 3 COMMERCIAL LEASE AGREEMENT AMONG THE KERRVII.LE-KERB COUNTY AIRPORT BOARD, THE CITY OF KERRVILLE, TEXAS, THE COUNTY OF KERB, TEXAS AND JOSEPH L. KENNEDY ENTERPRLSES, LTD., A TEXAS LIMITED PARTNERSHIP THIS LEASE AGREIIvviEENT, made this day of June, 2003, by and among the Kerrville~en County Airport Board, governing board of the Kerrville-Kerr County Airport pursuant to tbe Texas Municipal Airport Act, Tex. Transportation Code Chapter 22, hereinafter called the "Board,"; the City of Kerrville, Texas, a home rule municipal oorporatioq hereinafter called "City"; and the County of Kerr, Texas, a political subdivision of the State of Texas, hereinafter called "County," City and County being tbe record owners of the herein~escnbed real Property (Board, City and County sometimes collectively referred to as "I..essor"), and Joseph L Kennedy Enterprises, Ltd, a Texas limited partnership, whose principal a~ffioes are located in Kerrville, Texas, hereinafter referred to as "L,essee". RECITALS WHEREAS, the Lessor owns and operates the Kerrville--Kerr County Municipal Airport, located in the City of Kerrville, Texas, hereinafter referred to as "Airport", and; WHEREAS, Lessee desires to lease certain Lessor~wned land ffi the Airport to oonshuct certain impnoveinents and to engage in oertainaeronautical-related services to be provided to the public as hereinafter permitted; and NOW, TORE, for and in consideration of the covenants and conditions herein stated, Lessor and Lessee agree as follows: ARTICLE 1. GRANT OF LEASE 1.01 Leased Premises: Lessor agrees to lease to Lessee certain property owned by Lessor located at the Airport and being more particularly descnbed as Lots 9 and 10, and a 0.253 acre portion of Lot 11, as shown on the map recorded in Vohune 6, Page 331 of the Real Property Records of Kerr County and as indicated on the Leased Premises Map and Exhibit A as attached hereto, together with all improvements thereon and fixtures attached thereto, hereinafter being referred to as the "L,eased Premises." Lessee shall construct the improvements on the Southern portion of Lot 9 and within sixty days of the completion of the oonstnxxion by Lessee of the hangar and related facilities on the I.eased Premises, and issuance of a certificate of occupancy by the City, Lessee shall, at Lessee's sole cost and expense, have the Leased Premises surveyed ("Survey's and shall have this survey recorded among the official property records of Ken County, Texas. Within 30 days from the date of the completion of the survey, Lessee shall release the North portion of the Leased Premises not oaupied by said hangar, related facilities and paving from this Lease. Based upon such survey, Lessor and Lessee shall enter into an amendment ~ this Lease speafying the legal description of the Leased Premises and the rent shall be adjusted based upon tbe Survey as provided for in Amide 3. 1.02 Release of Improvements: Lessee agrees to transfer ownership of the improvements on Lot 10, specifically the building lrnown as the "blue hangar," on June 30, 2015, to Lessor, and further agrees to timely exewte any and all documents necessary to accomplish transfer of ownership of the building to Lessor. 1.03 Easements: This Agreement shall be subject to such easements, rights-0f-way, drill sites, or other rights or reservations affecting the Leased Premises which are of record or are dearly visible as of the date of this Agreement. ARTICLE 2. TERM OF AGREEMENT 2.01 Lease Term: This Agreement shall commence at 12:01 a.m. on June ~ 2003, and terminate at midnight on June ~ 2033, ("the Lease Tenn") unless terminated earlier pursuant to the provisions of this Agreement. 2.02 Optional Extension of Lease Tenn• Deleted. 2.03 Holdover of Lessee: If Lessee holds over or remains in possession of the Leased Premises after the termination of this Agreement in the absence of a new lease agreement between the Lessor and Lessee, such continuation beyond the date of tenninatioq or the collection or acceptance of rent, foes and/or other charges by the Lessor, shall not be construed as a renewal or extension of this Agreement, but shall be construed solely as creating a tenancy at will and not for airy other term whatsoever- Dieing the term of such tenancy at will, Lessee shall pay to Lessor the foes and charges herein reserved, and Lessee shall be bound by ar~d comply with all the relevant provisions of this Agreement The Lessor may temunate the tenancy at will by giving Lessee thirty (30) days written notice thereof ARTICLE 3. RENT 3.01 Amount of Base Rent: Lessee agrees to pay to Lessor rent for the Leased Premises 5.10 per square foot per Year for the period commencing on the date hereof until a~ including June 30, 2005, at which time the base rent shall be recalailated and adjusted annually according to the Consumer Price Index as defined under Section 3.02 oI'this Lease, below. The total rent due by Lessee during this initial period will be modified as follows: within ninety (90) days after the issuance of the certificate of occupancy for the newly constructed improvements described in Article 5 and Section 1.01 hereof; and recordation of the survey as regained in those sections, the rent due will be adjusted to reflect the change in square footage, if arty, resulting from tbe survey and release of part of Lot 9. The total Went due shall also be ~justed on June 30, 2010, in that the base rent shall continue to be 5.10 per square foot per year (as adjusted), but the total Went due shall be increased by 5500.00 per month to aoooimt for rental value of the improvements eadsting on Lot 10 on that date. As further consideration for the rental value of the improvements existing on Lot 10, the total rent due shall be increased by 5250.00 per year, with said incie~ occurring on June 30 of 2011, 2012, 2013, and 2014. The rental value for the improvements existing on Lot 10 on June 30, 2015 shall then be deternrined by using the base rental rate of 51,800.00 fa the improvements on Lot 10 as of the date of exeariion hereof; as that amount may be increa.9ad or decreased by changes in the Consumer Price Index during the intervening period, using the same methodology specified in 3.02, below. 3.02 Adjustment of Rent During Lease Term: During the Lease Term, the rent price per square foot to be paid by Lessee shall be increased or decreased on each anniversary of the effective date of this Agreement in accordance with changes in the Consumer Price Index for all Urban Consumers (Southern Urban Area) (the "Consumer Price Index") as promulgated by the Bureau of Labor Statistics of the United States Department of Labor, which Consumer Price Index for January 2003 is 175.1(the "Base Index") using the year 1984 as a base of 100. The Base Rent to be paid during the term of this Agreement shall bear the same ratio to the Consumer Price Index for the month of January preceding the date of the rent adjustment, as the original "5.10 per square foot per year" bears to the Base Index. In no event, however, shall the rent due be less than 5.10 per square foot per year. In the event the Consumer Price Index ceases to incorporate a significant number of items, or if a substantial change is made in the method of establishing such Consumer Price Index, then the Consumer Price Index shall be adjusted to the figure that would have resulted had no change occurred in the manner of computing such Consumer Price Index. In the event such Consumer Price Index (or a successor or substitute index) is not available, a reliable govenunental or other nonpartisan publicatioq evaluating the information thereto for use in determining the Consumer Price Index, shall be used in lieu of such Consumer Price Index. • 2 3.03 Deleted. 3.04 Deleted. 3.05 Deleted. 3.06 Delivery of Rent: All payments required of Lessee by this Agreement shall be made on a monthly basis, and shall be delivered by mail, or in person, to the Office of the Director of Public Works, City of Kerrville, Texas, 800 Junction Highway, Kerrville, Texas 78028, or to such other location as specified in writing by the Lessor from tune to time, no later than the first day of each calendar month of the Lease Tenn for which the payment is due, unless such due date falls on a Saturday, Sunday, or legal holiday, in which case such rent shall be due on the first City business day following the date such payment is due. The monthly rent for the initial term shall be $988.45 per month 3.07 Delinquent Rent Payments: In the event that payments to the Lessor for rent or other fees or charges are not received by the Lessor on or before the tenth day following the due date, Lessee shall pay a late rental charge of Two Percent (2.0%} of the rent amount due for that month. All rent and other payments which are past due more than thirty (30) days shall accrue simple interest. at the rate of eighteen percent (18.0%) annually or (b) the maximum percentage rate allowed b3' law, whichever is less. Notwithstanding anything to the contrary in this Section 3.07, if at the time performance of the provisions set forth in this Section 3.07 becomes due the interest to be paid in accordance with this Section 3.07 exceeds the limits on the payment of interest established by law, then the amount of interest to be paid shall be reduced to the maximum limit allowed by law, furthermore, if, from arty cirYarmstano~, Lessor should ever receive as interest an amount that would exceed the highest lawful rate, the amowrrrt that would be excessive interest shall be applied to the payment of rent owing pursuant to the provisions of this Lease Agreement and not to the payment of interest 3.08 Arn~lication of Amounts Received: Payments received shall be applied in the following order: (1) interest aocrtyed for late payments, (2) late rental charges, (3) pest due rent, beginning with the oldest amount due, (4) other past due amounts, (5) rent currently due, a~ (~ other amounts aurently due. 3.09 Other Charles: Nothing herein shall be deemed to relieve Lessee and its tenants, sublessees, patrons, im~itees and others from Airport use charges, including fuel flowage fees paid on fuel purchased by Lessee, as are levied generally by the Lessor directly upon the operation of aircraft, or from automobile parking permit fees for parking areas that are not included within the Leased Premises, or from security fees. ARTICLE 4. USE OF LEASED PREMISES 4.01 Permitted Uses: Lessee shall be permitted to use the Leased Premises for the purpose of conducting for- profit cornrrierciah aeronautical services or activities consisting of any or all of the following operations and no others: See Addendum attached hereto and made a part hereof for all purposes. Such other uses as may be permitted in writing by the Lessor. 4.02 Prohibited Uses: Lessee agrees at all times to comply with the following: A. Lessee shall at no time use, or permit the use ofy the Leased Promises in a manner that is contrary to applicable federal, state, county or city laws, orders, ordinances, rules, or regulations, which shall include, but not be limited ta, applicable Federal Aviation Administration nrles and regulations and applicable regulations for the use of the Airport as may from time to time be Promulgated by the Lessor, B. Lessee shall not permit any permanent, unshielded light or illumination source to cause glare as viewed from any street, adjacent properties or operating aircraft; C. Lessee shall not cause or permit the burial or storage above ground on the Leased Premises of any hazardous waste or materials, as defined by federal or state law, except in accordance with applicable federal, state, county or city laws, orders, ordinances, regulations and rules, as may be adopted or amended from time to time; D. Lessee shall not cause or permit any use or activity on the Leased Premises that would create a hazardous condition for aircraft operating at the Airport; E. Lessee shall not allow the Leased Premises to be used for parlang of motor vehicles, motorcycles, or motor driven equipment by anyone other than customers, employees, or contractors of Lessee except as may be authorized by the Director of Public Works, with all such parking being limited to areas designated by Lessor for such pazking. ~ Lessee shall not be in default for the improper parlang of vehicles over which neither Lessee nor a~ of its subtenants, customers, employees, or contractors have a~ control; F. Lessee shall not allow scheduled airline passenger operations to be conducted on the Leased Premises. G. Lessee shall not permit aircraft to access the Leased Premised from outside the Airport Property such that such access would constitute a "through the fence operation prohibited by contrails between Lessor and the State of Texas or the United States of America. 4.03 Compliance with Mmimum Standards: All activities conducted upon the Leased Premises, whether by Lessee or its officers, employees, contractors, or agents, shall be in substantial conformance with Title 3, Chapter V, of the Code of Ordinances of the City of Kerrville, Texas, "Airport Rules, Regulations, and Minimum Standards", as such regulations exist or may be duly amended from time to time by the Lessor to the extent that such regulations apply to Lessee's operations. 4.04 Non~xchrsive Uses: Lessee understands and adrnowledges that, as to that part of tbe Airport not included within the Leased Premises, the allowable uses permitted herein are on anon-exclusive basis with respell to other potential providers of aeronautical services at the Airport. ARTICLE 5. OBLIGATIONS OF LESSEE WITH REGARD TO CONSTRUCTION OF 1MPROVIIVIENI'S 5.01 Application for Building Permit: Upon execution herd Lessee shall make application for a building permit ("Permit's with the appropriate govemrriental agency on or before 90 days from date hereof for the construction of the facilities rieoessary to carry out the piuposes described in Section 4.01 above, and shall pursue issuance of such Permit with reasonable diligence. Lessor agrees to cooperate with Lessee in ol~aining such Permit Such facilities to be constructed shall include a hangar on the southwestern-most portion of Lot Sand aself-fueling depot. 5.02 Approval of Construction Plans: Not later than 90 days aRer commencement of the Lease Term and prior to airy construction, alteration, or changes to the Leased Premises, Lessee shall submit to the City's Airport Manager scaled plans and specifications of such oonstrtrction, and a site use plan with all drainage and utility services as existing or proposed indicated thereon. Lessee is solely rpsponsrble for ascertaining the requirements of a~ and all, federal, state, or local government agencies with ~ to permit and application procedures necessary to obtain final approvals and building permits prior to beginning arty construction on the Leased Premises. Lessee shall not commence a~ oonstniilion until it has received prior written approval from the Airport Manager and until the Lessee or tbe Lessor or both have received the necessary approvals from the Federal Aviation Administration, the City's Building O&cial, and 4 such other governmental authorities as are necessary for the type of constriction contemplated. In those instances in which the Lessor is required to make application for oonstnxxion or alteration of the Airport due to the Lessor being the holder of the Airport Operating Certificate, the Lessor agrees to promptly and diligently make and prosecute such applications. Once necessary approvals and permit(s) have been obtained, Lessee shall, not later than 180 days after issuance of approval and permit(s), solely and entirely at Lessee's cost, risk and expense, commence to construct, build and enact the Improvements in accordance with the final construction plans and specifications hereinabove mentioned. 5.03 Completion Requirements for Self-Fueling__Depot: Lessee agrees to complete installation and establish operation of the self-fueling depot within 180 days from the date hereof. 5.04 ~proval of Plans Not Assurance of Design Quality: The approval by the Director of Public Works or arryone else ailing on behalf of Lessor of airy plans and specifications applies only to the conformity of such plans to the general architectural and operational plan for the Leased Premises and the Airport. The approval of the Director of Public Works does not constitute approval of the quality of the ar~chitecxural or engineering work performed. Neither Lessor nor the Iirector of Public Works assurnes any liability or responsibility for the architectural or engineering design or for a~ defect in any building or improvement constructed from the plans or specifications. Construction of airy contemplated improvements shall be in accordance with the plans presented to and approved by the Director of Public Works. All construction work shall be subject to inspection ~ a representative employed by the Lessor or an inspector from the City's Planning and Development Services Department, or both, to determine that such work conforms to the plans and specifications approved by the Lessor. 5.05 Contractor's Insurance: Bonds: At airy time construction activities are undertaken on the Leased premises, Lessee shall require that its contractor or contractors keep in force insurar-ce issued by a responsible insurance company or oomparries authorized to conduct business in the State of Texas insuring the improvements during construction under Completed Builder's All Risk Insuruxe, including fire, extended coverage, vandalism and malicious mischief; in an amount equal to the full insiuable value of such construction as tbe saw progresses in order to inArre continuity of construction and ultimate completion despite damage or destruction suffered during the cause thereof. Furthermore, Lessee shall require all contractors performing construction work on the Leased Premises to provide payment and ped'ormarroe bonds issued by a responsible bonding compa~ or companies authorized to conduct business in the State oaf Texas for the full amount of the cost of the construction to be performed on forms which are in compliance with Chapter 2253 of the Texas Government Code, as amended- The foregoing shall be made a part of arty contract between Lessee and its contractor or contractors. In the event Lessee does a~ constnxxion work itself; it shall comply with the all-risk insurance provisions hereof. 5.06 Comaliance With Building_Codes and Federal Standards: All imps+ovemer-ts it~ade to the Leased premises by Lessee shall comply with all applicable City Building Codes and Federal standards for cor-stnrction of airport improvements in effect at the time construction commences as well as all other applicable federal aviation regulations, if ate. 5.07 Enarmbrance of Leasehold Estate: Lessee may encumber its leasehold interest in the Leased Premises by deed of trust, mortgage, security agreement or other security interest without the prior written consent of the Lessor as set forth in the Addendum attached hereto. 5.08 Ownership of Building~Tmprovements and Fixtures: Any and all buildings, improvemeNs (including, but not limited to all aprons, taxiways and roadways}, additions, alterations, and fixtures existing on the Commencemerrt Date or oonstrucGad or planed on any part of the Leased Premises during the Lease Term try Lessor or Lessee, shall be considered part of the real property of the Leased Premises, shall remain on the Leased Premises, and shall not be removed by Lessee or arty sublessee without the written consent of Lessor. Except as otherwise provided in this Lease or an Addendum hereto, improvements, additions, alterations, and fixtures on the Leased Premises shall become the sole Property of Lessor upon termination of this Agreement without compensation to Lessee, it being understood and agreed by Lessee that the transfer of title to the Lessor of the buildings and improvements located on the Leased premises at the end of the Lease Term is additional consideration for this Agreement. Notwithstanding the alJOn+e, Lessee shall have the 5 right at any time during Lessee's oocrq~ancy of the Leased Premises, or within a reasonable time thereafter, to remove arty and all fiuniture, machinery, equipment, or other trade fixtures, owned or placed by Lessee, in, under, or on the Leased Premises; provided, however, prior to the temrination of the Lease Term, Lessee shall repair a~ damage to airy buildings or improvements on the Leased Premises resulting from their removal. Any such personal properly items or trade fixtures which are not removed within sixty (60) days after the termination date of this Agreement shall become the property of Lessor as of that date. 5.09 Failure to Construct Improvements• Lessor shall have the right, exercisable at its sole option, to terminate this Lease Agreement if: A Lessee fails to commence construction of the improvements required to conduct Lessee's operations on the Leased Premises on or before the 180th day after commenoerrrent of the Lease Term; or B. after constnucrion of the required improvements has commenced, Lessee fails to complete constnuction of the improvements on or before the second anniversary of commencement of construction. 5.10 Availability of Sanitary Sewer: Lessee understands and acknowledges that tbe Leased Premises is not served with sanitary sewer service as of the commencement of the Lease Term. Lessee shall be solely responsible for installing and maintaining at Lessee's cost an on-site sewage facility that complies with all applicable state and local regulations with sufficient capacity to provide sanitary sewer disposal for Lessee. If City extends a sanitary sewer collection main adjacent to the Leased Premises, Lessee agrees it will construct a sanitary sewer service line to connect to the sanitary sewer collection main not later than 180 days after receiving written notification from Lessor that the sanitary sewer collection main is complete and ready to receive waste. If Lessee has ooristrucYed its facilities and is operational at the time of the extension of sanitary sewer service to the Leased Premises, Lessee shall not be required to pay a capital r+eoovery fee to the City as otherwise required by ordinance upon connection to City's sanitary sewer 5.11 Discharge to Sanitary Sewer. Pre-treatment- Lessee shall at no time discharge or allow the discharge of any substance into City's sanitary sewer system that is otherwise prohibited by federal, state, or local law, ordinance, or regulation. In the event that pretreatment of waste is required prior to the discharge into the City's sanitary sewer system of waste generated fiom the Leased Premises, Lessee must construct such pre-treatment facility at its sole expense in compliance with applicable federal, state, and local laws and reguations. ARTICLE 6. REPAIRS. MAINTENANCE AND RESTORATION 6.01 Maintenance by Lessor: Lessor shall, at Lessor's sole expense, keep in good repair, condition and appearance the taxiways and roadways which have been or may be constructed by Lessor. Lessor shall commence required repairs as soon as reasonably practicable after receiving written notice from Lessee thereof. 6.02 Maintenance by Lessee: Lessee shall, at Lessee's sole expense, keep the Leased Premises and all improvements of a~ kind, which may be existing at the commencement of the Lease Term or erected, installed, or made thereon by Lessee after commencement of the Lease Term, not required herein to be maintained by Lessor in good repair, condition and appearance. Lessor shall be the sole judge of the quality of Lessee's maintenance; provided, however, Lessor shall not unreasonably withhold acceptance of said repairs or maintenance. Upon written notice by Lessor to Lessee, Lessee shall be required to perform such reasonable maintenance under this Section 6.02 as Lessor considers necessary. If Lessee does not undertake such maintenance within ten (10) days after receipt of written notice, Lessor shall have the right to enter on the Leased Premises and perform the necessary maintenance, the cost of which shall be borne by Lessee. Subject to the provisions of Section 5.07, on the last day of the Lease 6 Term, or on any sooner termination, Lessee shall surrender the Leased Premises to Lessor in the same condition as received and clean and free of debris, except for fire and casualty damages or ordinary wear and tear. 6.03 Trash and Waste Removal: Lessee agrees to cause to be removed from the Leased Premises, at its own expense, all waste, garbage and rubbish, and agrees not to deposit same on the Leased Premises except temporarily in waste or garbage containers provided by Lessee at Lessee's expense. Lessee further agrees that Lessee will store all parts, supplies, and other materials on the interior of buildings located on the Leased Premises, provided, however, that any parts or supplies which must be kept outside because of volatility of the supply item or the size of the part will be kept out of view of the public traveling on public rights of way or other s~urounding tenants by installation of fencing or other means of screening approved by the Airport Manager. ARTICLE 7. ACCESS TO AND USE OF AIItPORT 7.01 Access to Airport: Lessor shall nrairrhain all roads on tbe Airport giving access to the Leased Premises in good and adequate condition for use by cars and trucks and shall maintain free and unintemrpted access to the Leased Premises over said roads at all times; provided, however, Lessor shall not be in default of this Agreement if access is intemrpted for a~ of the reasons set forth in Section 16.03, below. 7.02 Right to Use Airport: Lessee and Lessee's officers, employees, agents, contractors, irnitees, and guests shall have the right to use that part of tbe Airport and its facilities not included within the Leased Premises in common with others authorized to do so. Such use shall be subject to any and all applicable federal, state or local laws, ordinances, statutes, rules, regulations, or orders of any gavenunental authority, lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including arty limitations, restrictions or prohrbitions affecting the aviation activities or operations of Lessee. 7.03 Vehiarlar Operations on the Airfield: No vehicles of Lessee, its officers, employees, agents, contractors, invitees, and guests will be operated on, or cross, the runways of the Airport except p~usuant to the Airport Rules and Reguations. 7.04 Airport Certification Rules and Re tons: Lessee shall comply with such rules that pertain to its operation on the Airport antler the Airport Certifications Rules of Federal Aviation Regulations Part 139, as amended [14 CFR Part 139, as arrrendedj, to the extent such regulations are applicable to the operation of the Airport. 7.05 Airport Securit~Rules and tions: Lessee, its officers, employees, agents, contractors, uivrtees, and guests shall comply with all federal and local Airport Security Regulations adopted by the Lessor as such rules and regulations exist or Wray hereafter be amended. LESSEE AGREES TO INDEIvII~TIFY AND HOLD HARMLESS THE LESSOR TI'S OFFICERS AND IIyIP'L.OYEES, from any charges, fines or penalties that may be assessed or levied by the FAA or the Texas Department of Transportation by reason of the NEGLIGENT OR INTEN'T'IONAL FAII.URE OF LESSEE 1TS OFFICERS EMPLOYEES AGENTS CONTRACTORS INVITEES AND GUESTS to comply with such Airport Security Regulations. 7.06 14 C.F.R. Part 77 Rewiremer-ts: Lessee agrees to comply with the notification and review requirements set forth in Part 77 of the Federal Aviation Regulations [14 CFR Part 77] in the event airy future structure, antenna or building is planned for the Leased Premises, or in the event of arty planned modification of arty present or future building, antenna or structure located on the Leased Premises. 7.07 Control of Stitrchrres: Lessee shall not erect nor permit the erection of arty structure or object, nor permit the growth of arty tree on the Leased Premises which highest poirn is above a mean sea level elevation established by the FAA and Lessor as a height limitation on such or objects. Lessor reserves the right to enter upon the Leased Pr+etni.5es and to remove tbe offending structure or object and eat the offending tree at Lessee's expense. 7 7.08 Aerial ~: Lessor reserves the right t0 take a~ action it considers necessary to protect the aerial approaches of the Airport against obstrucUion together with the right to prevent Lessee from erecting or permitting to be erected arty building or other structure on or adjacent to the Airport which, in the opinion of the Lessor, would limit the usefulness of the Airport or wnstitute a hazard to aircraft. 7.09 Rigl-t of Overflight: There iS hereby reserved to the Lessor, for the use and benefit of the public, a right of flight for the passage of aircraft above the surface of the Leased Premises, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft, now known or hereafter used for navigation of or flight in the air, using said airspace for landing at, taking off from or operating on the Airport. ARTICLE 8. INSURANCE 8.01 Lessee's Minimum Insurance Amo~mts: Lessee shall obtain and maintain continuously in effect at all times during the Lease Term, at Lessee's sole expense, at least the following minimum insurance with a carver or carriers licensed to do business in the State of Texas and satisfactory to the Lessor: A. Commercial General Liability Insurance against claims for bodily injury, death, or property damage occurring on, in or about the Leased Premises, or any other portion of the Airport, in at least the amount of $1,000,000.00 per individual, $2,000,000.00 per occurrence and $1,000,000.00 with respect to property damage. In the event that the Texas Torts Claims Act, as amended (Tex. Civ. Prac. & Rem. Code §101.001, et seq.) or its successor statute, is amended to increase the amount of liability of municipalities for acts described in said Act above the levels set forth in this Section 8.O1.A, Lessee agrees to increase the amount of insurance coverage required by this Section 8.O1.A. to an amount sufficient to provide coverage to the level of potential liability per occurrence under said Act; and B. Automobile Liability Coverage on all motor vehicles owned and/or operated by Lessee or its employees on the Leased Premises or other Airport property in amounts of not less that $500,000.00 combined single limit or equivalent; provided, however, separate automobile coverage shall not be required if such coverage is provided under Lessee's comprehensive general liability policy. C. Property and Casualty Insurance on improvements constructed on the property, whether owned by Lessee or Lessor, insuring against loss or damage to improvements due to fire, lightning and all other perils included in standard extended coverage policies, and vandalism and malicious mischief, all in amounts of not less than ninety percent (90°/a) of replacement value; D. If required pursuant to Article 3-V-10(a.x2) of the Code of Ordinances of the City of Kerrville or its successor ordinance, Hangarkeeper's Liability coverage in the minimum amount of $1,000,000.00 per occurrence unless similar coverage exists under the required general liability policy; E. Environmental Liability Coverage in the amount of not less than $1,000,000.00 per occurrence. 8.02 Lessee's Coverage Primary: All insurance herein required shall apply as primary and not in excess of or contnbuting with other insurance which the Lessee may carry. Insurance provided pursuant to Section 8.01 shall name the Lessor as an additional insured or loss payee as the case may be. The comprehensive general liability policy as provided in paragraph 8.O1.A. shall provide contractual liability coverage sufficiently bread so as to include tbe liability assumed by Lessee in the indemnity and hold harmless provisions included in Article 9 of this Agreement 8 8.03 Contents of General Liability Policy: Lessee's Comprehensive General Liability policy shall protect the Lessor and Lessee against a~ and all liability to a~ person or persons whose pn7perty damage or personal injury arises out of or is in connection with the oocupatioq use, or condition of the Leased Premises or resulting from any injury or damage occurring on or about the roads, driveways or other public areas of the Leased Premises used by Lessee, its officers, employees, agents, contractors, invitees, and guests at the Airport, whether or not such damage or injury is the result of negligence of the Lessee or its officers, employees, agents, contractors, invitees, and guests. 8.04 Cancellation; Certificates of Insurance: Lessee's in~irance as required by this Agreement shall not be subject to cancellation or material alteration until at least thirty (30) days written notice has been provided to the Lessor. Lessee shall furnish to the Lessor, annually, Certificates of Insurance showing Lessor as an additional insured and evidencing that all of the herein stated requirements have been met 8.05 Lessor's Right to Purchase Insurance: In the event such insurance as required by Section 8.01, above, shall lapse, the Lessor reserves the right to obtain such insurance at Lessee's expense. Upon demand from Lessor, Lessee shall reimburse Lessor for the full amount of the premium paid on Lessee's behalf. ARTICLE 9 INDENIl~TTI'Y 9.01 Generally: LESSEE AGREES TO INDEMNIFY, DEFEND, AND HOLD I:[ARML.ESS T~ CTTY COUNTY, AND THEIIt RESPECTIVE OFFICERS EMPLOYEES AND AGENTS from and against a~ and all loss, damage, liability, claims, demands, costs, charges, expenses and causes of action including all costs of defense thereof (and including reasonable attorney fees) of whatsoever character which the Lessor may incur, sustain, or be subjected to on account of loss, damage to property and loss thereof and for bodily injury to or death of airy persons (including but not limited to the property, employees, customers, contractors, agents, invitees and licensees of each party hereto) ARISING OUT OF THE CONDUCT OR OPERATIONS NEGLIGENT OR OTHERWISE OF LESSEE TTS DIRECTORS. OFFICERS. EMPLOYEES. SUBLESSEES CONTRACTORS SUBCONTRACTORS OR AGENTS on the Leased Premises. The Lessor will give Lessee prompt notice of any claim made or suit instituted which in a~ way affects or might affect the Lessor. Similarly, Lessee will accord the Lessor the same notice and rights. 9.02 Environmental Matteis: LESSEE AGREES TO INDENiNIFI'. DEFEND AND HOLD HARMLESS CITY COUNTY, AND THEIR RESPECTIVE OFFICERS EMPLOYEES AND AGENTS from and against an}' loss, costs, damages, claims, assess,stances for which it is not responsrble or which one not in its control. 16.04 No Partnership. Agency, Joint Venture: It is mutually understood and agreed that nothing in this Agrcement is intended or shall be oonstnred as in airy way creating or establishing a~ partnership, joint venture, agency, or arty other relationship between the Lessor and Lessee other than landlord and tenant, respectively. 16.05 Inspection by Lessor. Lessor may enter upon the Leased Premises at any reasonable time for arty purpose necessary, incidental to or connected with the perforrnanoe of Lessor's obligations hereunder, or in the exercise of its governmental functions, for fire protection or security purposes, or for inspecting or ma;ma,~ni~ the L~,~ Premises, or doing any and all things Lessor is obligated to do, or which may be deemed by Lessor necessary or desirable for the proper conduct and operation of the Airport or the protection of Lessor's interests. 16.06 Conformance with Rules and Regrila~ons: The use of the Airport by Lessee shall be subject to arty and all rules, regulations and ordinances which are now in force or which may be hereafter adapted by the Lessor with respecx to the operation and use of the Airport, but no such rules, regulations, or ordinances shall increase the Base Rent payable by Lessee under this Lease or otherwise materially and adversely affect Lessee's tenure of the Leased Premises under this Lease. Furthernrore, this Agrcernent and Lessee's use of the Airport shall be subject to arty and all applicable laws, ordinances, resolutions, statrrtes, rules, regulations or orders of arty Federal, State or local goverrunental authority lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including a~ limitations, restrictions or prohibitions affecting the aviation activities or operations of Lessee. 16.07 Licenses and Permits: Lessee hereby agrees that it shall, at its own expense and cost, procure and obtain all lawfuhhy required licenses and permits, certificates and other authorizations required by any governmental authority, in oonrrection with or covering the operations or activities permitted to be performed by it under the provisions of this Agreement 16.08 Notices: Notices provided for in this Agreement shall be either hand delivered or sent by certified main, r~urn receipt requested, Postage Prepaid, and Properly addressed as follows: If to Lessor: City Manager and Airport Manager 800 Junction Highway Kerrville, Texas 78028 AND County Judge Kerr County Courthouse 700 Main Street Kerrville, Texas 78028 If to Lessee: Joseph L. Kennedy Enterprises, Ltd do JLK Management L.L.C. 1875 Airport Loop Road Kerrville, Texas 78028 13 The parties may change the representative or address for delivery of notices from time to time by sending written notices to the other party. All notices shall be in writing and effective only upon actual receipt. 16.09 Governing Law and Venue: This Agreement and all of the transactions contemplated herein shall be governed by and construed in accordance with the laws of the State of Texas. Venue for airy cause of action shall be in a court of competent jurisdiction in Kerr County, Texas. 16.10 Severability: If any provision of this Agreement is invalid or unenforceable, this Agreement shall be considered severable as w such provision, and the remainder of this Agreement shall rem~n valid and binding as though such invalid or unenforceable provision were not included herein. 16.11 Cautions: Section headings are inserted herein only as a matter of convenience and for reference, and in no way defines, limits or descnbes the scope or irrtent to any provision herein. 16.12 Use of Language: Words of a~ gender used in this Agreement shall be held and construed to include arty other gender, and words in the singular shall be held to include the plural, unless the context otherwise requires. 16.13 Counterparts: This Agreement may be executed in multiple counterparts, each of which shall be deemed as original, and all of which wnstitute but one and the same instnunent. 16.14 Development of the Airport: Future development, changes, alterations, modifications or improvement to the Airport shall be at the sole disci.ion of the Lessor, subject. only to such notification to Lessee that the Federal Aviation Administration may dictate. The Lessor will strive not to hinder the Lessee's operations in carrying Dirt the provisions of this paragraph 16.15 Relocation of Facilities: In the event Lessor requires airy portion of the Leased Premises for expansion or development of the Airport, Lessor reserves, at its sole expense, the right, on six (6) months' notice, to relocate Lessee to substantially similar facilities at another generally comparable site located on the Airport. Lessor reserves the right to retake minor unimproved portions of the Leased Premises, such as will not substantially interfere with the Lessee's improvements or operations, without compensation to the Lessee, provided that the rent shall be abated as to that portion of the Leased Premises which is taken back by Lessor. 16.16 Subordination to State or Federal At~+eemerrts: This Agreement shall be subordinate to the provisions and requirements of a~ existing or future agreement between the Lessor and the United States or the Lessor and the State of Teams, relative to the development, operation or rnainteoanoe of the Airport. 16.17 No Exclusivity on Aeronautical Services: Nothing herein contained shall be constnred to grant or authorize the granting of the exclusive right to provide aeronautical services to the public as prohibited by Section 308(a) of the Federal Aviation Act of 1958, as amended. 16.18 Discrimination Prohibited: The Lessee, for itself; its officers, legal representatives, srlocessors-in- interest and assigns, as a part of the coirsideration hereof; agrees (1) that no person on a~ grounds including race, Dolor, sex, national origiq veteran status or disability shall be excluded from participation iq denied the benefits of or be otherwise subjected to discrimination in the use of the Leased Premises; (2) that in the conslrtrction of arty improvements on, over or under the Leased Premises and the famishing of services thereon, no person on the grounds of race, sex, color, national origin, or disability shall be excluded from participation th, denied the benefits of or otherwise be subjected to discriiriirration; (3) that the Lessee shall use the Leased Premises and the Airport in compliance with all other requirements imposed by, or pursuant to, Title 49, Code of Federal Regulations, Department of Transportation, Subtifle A, office of the Secrctary, Part 21, Nondiscrimination in Federally-Assisted Programs of the Department of Transportation-Effectuation of Title VI of the Civil Rights Act of 1964, and as said regulations may be amended. In the event of breach of a~ of the above nondiscrimination covenants, the Lessor shall give notice of the alleged breach and state with particrilarity the basis o~ and the facts on which, the alleged breach has occurred. Lessee shall have at least thirty (30) days in which to cure said alleged breach by eliminating/oeasing arty such breach, or such additional period as 14 may be reasonable and necessary to complete the same. If such alleged breach is not so cured by eliminating/oeasing any such breach within such period, Lessor may upon written nofice to Lessee terminate this Agroement. 16.19 Entire A ment: This Agreement embodies the entire agreement between the Lessor and Lessee, and supersedes all prior agreements and understandings, whether written or oral, and all contemporaneous oral agreements and understandings relating to the subject matter hereof. This Agreement shall not be changed, modified, discharged or extended, except by written instrument duly executed by Lessor and Lessee. The parties agree that no representations or waaanties shall be binding upon either pally unless expressed in writing in the aforesaid Agreement. SEE ADDENDUM ATTACHED HERETO AND INCORPORATED HEREIN FOR ALL PURPOSES. 1N WITNESS VVHEItEOF, the parties hereto have caused this Agreement to be legally executed in duplicate this day of , 2003. LESSOR LESSEE: KERRVR .T .R KERB COUNTY AIRPORT BOARD By: Dr. John Davis, Chair, Airport Board APPROVID: CITY OF KERRVR i.R Stephen P. Fig,. Mayor ATTEST: Brenda G. Craig, City Clerk APPROVED AS TO FORM: Michael C. Hayes, City Attorney JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership By: JLK MANAGEMENT, L.L.C., a Texas limited liability company 15 Joseph L. Kennedy, Jr., President v•. ~.: ~ ~ :? ~; COUNTY OF KERB, TEXAS THE STATE OF TEXAS § COUNTY OF KERB This instrument was acknowledged before me on this day of 2003 by Dr. john Davis, Chair, Kerrville-Kerr County Airport Board, for the KERRVII.L.E KEItR COUNTY AIRPORT BOARD, on behalf of said BOARD. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB This instrument was acknowledged before me on this ~3 ~'"~ day of ~c%llC--- 2003 by PAT TEXAS, on behalf of said COUNTY OF KERR, TEXAS. • tM;!w HELENA HANNA t * .,,.A;~' ; NOTARY PUBLIC t ~~•: S State of Texas •~~o~• COf"'^• ~• ~-~•~ Notary Public, State of Texas ••..... THE STATE OF TEXAS § COUNTY OF KERB This instnrmerrt was acknowledged before me on this day of 2003 by STEPHEN P. FINE, Mayor of the CITY OF KERRVII.LE, TEXAS, on behalf of said CITY OF KERRVII..L.E, TEXAS. r' Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERR This irrshument was acknowledged before me on this day of 2003 by JOSEPH L. KENNIDY, JR., President of JLK MANAGEMENT, L.L.C., a Texas limited liability company, General Partner of JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, on behalf of said partnership. Notary Public, State of Texas 16 j, \+t„ + r , ~. Y ~ ~' ~ l b ,l+'' ~ ~ U splp°a~ 1Cli datu ~Q ugt~a~a~ .:;`'~.. `~ , , ~ ~ ~~~~q ~ y~~ ~~,au~~o~ 1~a~I3 al paP~.oaa. ~ ~ .~. ,,~ , • i 1, •x ~ ~' < ~ ya .; ~~ (: ' ., ~ ~ rj .rte ~L ~• ~~ ;)v tl.•i t'+ X11 a, }`, i'.l 1 t,+,~.,,/ .t ~ r is ~ ~ t .liv '~s~9~ `" U N ,Y 1 S » W 27~~ o n 1 '~1 ~~ ~ .mot' } ~tti , ...+ _ or'6SZ ~ ~ ~ ~L OCS T ~ ,r'~ ~'.1 ~ ~ }c, ,tr, (:' . t ' W '.\I :i '!i t N ,t~ N flE1 ~j \1~J ~ »t.r ~ ` { tT ~~ t..,,~,. ,,;.,~';a..4C'f8£ M'S£Lro'tQ~ `^ ~~ ~:)`~ Uy.eSt »~• ~. Z 3.1~ S t .498b ,, •QZ ~ ~ g'9S) ~. % 't 21'1 S :11 ;'t:t1~+1.` r, +l~ ',1H•YL) t,i,~,y1 ailx N c c to \~ N ~ 2.1 ~~ °~' ° ~ • ~ W ' \ '~ ?+ ~ j . 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';74° t,i).i • `~ ~ m r ~". dv ~. ,) •~ •*t ,ff't9t r^ ~~ ,SL'99t, ~ ri - . . ... , .', ~~ ~-c - - ~ .• VQL4~9 PAGE 99 - ,~FIELD~NOTES DESCRIPTION FOR A 100 FT. HIDE EASEHENT OUT OF TRACT N0. t~_i ~ 10 7N THE KERRYILLE-KERA COUNfY AIRPORT, IN .THE CITY OF RERRVILLE, ~~ KERR.COUNTY, TEXAS - Being a certain 100 ft. vide strip, tract or parcel of land out of 0. V. Robinson Survey ' No. 44, Abstract No. 282, in the City of Kerrville, Rerr Countj, Texas; part of Tract No. _ 10 as shown on the Leasing Hap for the Kerrville-Kerr County Airport; and. being more - particularly described by metes and bounds as-follows: -" _ - _ BEGINNING at a 1/2" iron stake for a reentrant corner of said Tract No. 10 and east corner - ~ ~ of an aircraft parking apron, the north corner of the herein described easement; which point bears approximately 600 ft. 5.15°_38'E. from ,the south corner of Tract No. 3 _ _ currently leased to K X Aviation; -- " ~ _- _ T1[ENCE, 5.73' S6'N. 100.00 ft. along the-southerly northwest line of Tract No. 10 to _a = 1/2" iron stake at its southerly west corner, the Korth corner of Tract No. I1 and the vest corner of the herein described easement; TRENCE, along the Common line between Tracts No. 10 and No. 11, 5.15' 38'E. 108.32 ft. to a 1/2" iron stake set in the north line of an eightq (80) ft. wide reserve strip for the south corner of the herein described easement, the south corner of Tract No. 10 and the east corner of Tract No. 11; THENCE, with the said north line of 80 ft. wide reserve strip and south line of Tract No. 10: N.73° 56'E., 60.71 ft.~to a 1/2" iron stake set for an angle; and N.88' 00'E., 40.43 ft. to an 1/2" iron stake set for the east corner of the herein described easement; THENCE, upon, over and across Tract No. 10, parallel with and 100 ft. from its southerly southwest 1ine,,N.15° 38'W. 118.15 ft. to the PLACE OF BEGINNING, encumbering 0.253 acre (11,025 sq. ft.) of land, more or less, within these metes aid bounds. I hereby certify that these field notes are an accurate description of the property contained therein as determined-by a survey made on the ground under my direction and supervision, except -_ no survey was made to reestablish Patent Survey lines or corners; and that a~l property comers are as stated. Dated this 23rd day of January, 1985 ~ ~. v ~Q~~.aF TF+ Lee C. Voelkel ~ ~' ~ qs' Registered Public Surveyor No. 3909 *'. '~ County Surveyor for Kerr County 1~~~_~LEE_C. UOELKEL••• EXHIBIT "A" ,3 ~,~'7 ~, v J YOL479 PAGE 95 F' 'FIELD NOTES DESCRIPTION FOR A 1.32 ACRE TRACT OUT OF TILE KERRVILLE- KERR COUNTY AIRPORT FOR LEASE TO S. ~ S. AVIATION, IN THE CITY OF ' KEARVILLE, KERB COUNTY, TEXAS Being all of a certain 1.32 acre, more or less, tract or parcel of land out of 0. V. Robinson Survey No. 44, Abstract No. 282, in the City of Kerrville, Kerr County, Texas; parts of Tracts designated as No. 9 and No. 10 on the Leasing ltap for the Kerrville-Kerr County Airport; and being more particularly described by metes and bounds as follows: BEGINNING at a 1/2" iron stake set for the northerly west corner of the herein described tract in the southwest line of Tract No. 9, 450 ft. 5.15' 38'E. from the south corner of Tract No. 3 currently leased to K X Aviation; THENCE, upon, over and across Tract No.•9, 50 ft. from and parallel vith the co®on line between Tracts No. 9 and No. 10, N.74' 22'E. 200.00 ft. to a 1/2" izoa stake set for the north corner of the herein described tract In the northeast line of Tract No. 9 and the southwest line of a 100 ft. vide reserve strip; THENCF,, along the southwest line of said 100 ft. wide reserve strip and northeast lines of said Tracts Nos. 9 and 10, 5.15' 38'E., at 50.00 ft. passing the east corner of said Tract No. 9, the north corner of said Tract No. 10, then continuing for a total distance of 231.46 ft. to a 1/2" iron stake set at an angle point; and 5.02'00'E. 82.83 ft. to a 1/2" iron stake set for the east corner of the herein described tract at the intersection of the southwest line of said 100 ft. wide reserve strip with the northwest line of an 80 ft. wide reserve strip; THENCE, 5.88' 00'W. 185.70 ft. along the southeast line of Tract No. 10 and northwest line of said 80 ft. vide reserve strip to a 1/2" iron stake set for the south corner of [he herein described tract; TIiENCE, N.15° 38'W., 118.15 ft. upon, over and across Tract No. 10 to a 1/2" iron stake set for a reentrant corner bf Tract No. 10 at the east corner of an airczaft parking apron, then continuing for a distance of 100.00 ft. along the northerly west line of Tract No. 10 [o a point for its northerly vest corner, the south corner of Tract No. 9, and then 50.00 ft. along the southwest line of Tract No. 9, a total distance of 268.15 ft. [his call, [o the PLACE OF BEGINNING. - I hereby certify that these field notes are an accurate description of the property contained therein as determined by a survey made on the ground under my direction and supervision, except no survey was made to reestablish Patent Survey lines or corners; and that all property corners are as stated. Dated this 22nd day of January, 1985 lu. ~ . ~Ia..~.-t,~:.~~ Lee C. Voelkel Registered Public Surveyor t7o. 3909 County Surveyor, for Kerr County IAT 10 .............. ~~~~~LEE C. VOELhEL . ~:.... 3~'~~ ..... Q G•'~rc~ ~ca~ y:i ~~~~ (~ ~ • -HONE 612-26~J719 . 272 CLAY STgEET, KERRVIIIE, TExA3 7a02a . - , .~. ~. L -~ VOL4~9 PAGE 96 ~ FIELD NOTES DESCRIPTION FOR A 1.15 ACRE TRACT OUT OF THE KERRVILLE- _ ~~KERR~COUNTY AIRPORT, IN THE CTTY OF KERRVILLE, KERit COUNTY, TE7(AS THENCE, with the said west line of 80 f[. wide strip and northeast line of Tract No. 9, 5.15° 38'E., 250.00 ft. to a 1/2" iron stake set for [F.e east corner of the herein described tract; THENCE, upon, over and across Traet No. 9, fifty (50) ft. from and parallel to the common line between Tracts Nos. 9 and 10, 5.74' 22'FT., 200.00 ft. to a 1/Z" iron stake set in the west line of Tract No. 9 for the south corner of the herein described tract; THENCE, with the southwest line of said Tract No. 9, N.IS° 38'u. 250.00 ft. to [he PLACE OF BEGINNING. I hereby certify that these field notes are an accurate description of the property contained ZE- OP T~ therein as determined by a survey made on the ~~P'. !--. 'r7s., ground under my direction and supervision, except kr~ _f_ ;f _•• _~_:'.r`t no survey was made to zeestablish Patent Survey •• • ~ ••~~ ~~~ ~~•.~ ~~LEE ~. ;~;:t"1. lines or corners; and that all property corners ••• ••••••• •• are as stated. .'a".- _ ~~•~~~ _ ___, - Dated this 23 z¢ day of January, 1985 t~,~.+ ~ r Lee C. Voelkel Registered Public Surveyor No. 3909 County Surveyor For Kerr County I,OT 9 ~S~ Being all of a certain 1.15 acre, more or less, tract or parcel of land out of 0. V. Robinson Survey No. 44, Abstract No. 282, in the City of Kerrville, Kerr County, Texas; part of Tract No. 9 as designated on the Leasing Hap for the Kerrville-Kerr County Airport; and being more particularly described by metes and bounds as follows: BEGINNING at a 1/2" lron stake in the south line of a two-hundred (200) f[. vide reserve strip for the north corner of the herein described tract and said Tract No. 9; which poinC bears 200 ft. 5.15° 38'E. from the south corner of Tract No. 3 currently leased to K X Aviation; • THENCE, with the said south line of 200 ft. wide strip and northwest line of said Tract No. 9, N. 74° 22'E., 200.00 ft. to a 1/2" iron stake set at the intersection of the south line of 200 ft. wide strip with the west line of an eighty (80) ft. wide reserve strip for the north corner of the herein described tract and said Tract :To. 9; wv'tl msl aMRl1.MtlfBflf b Ji~NRYb95 . -/WNE 312.257-:1912 212 CL/~Y STREET, 1G E1111v11LG TElfwS 7a02a :-.,. ~~. ~µk .~~ .`,,•. •a ~iF~: 'r ~ !r i . `u,' ~ '~ ~ '~ a a 1 ~. ,• >a~.~ , . ~i ~,T ,, . ~~ • i ,~~~r.,. S ~ .. ~;~~~` - o~ :~ ~~~~ • ~ ~r~~~ ~ ~+,~~~. ~~~ ~ .~q~~ ~~~ ~ ~~~6 ,; ~,~ L r r ~. '., ~~ ,~~ .. ~ 1. ~`~ Acre es flat snowing yon 00 ~cs2 ~gement _ ~d 25 e ~:'~`~f 4`~` Y Eli .~,,~;~~ . ~; O }-- Wit} 1 ~-~1 QA~~ s~ Va~~-t ~ ~ ~. , ~• ADDENDUM TO COMMERCIAL LEASE AGREEMENT AMONG KERRVII.,LE-KERB COUNTY AIRPORT BOARD, CITY OF KERRVII.LE, TEXAS. KERB COUNTY. TEXAS AND JOSEPH L. KENNEDY ENTERPRISES. LTD. 1. Reference. The terms, provisions and covenants of this Addendum are hereby incorporated by reference into the Commercial Lease Agreement Among the Kerrville-Kerr County Airport Board, City of Kemille, Texas, The County of Kerr, Texas and Joseph L. Kennedy Enterprises, Ltd. (the "Lease") to which it is attached and in the event of conflict between said Lease and this Addendum, this Addendum shall goveni and the terms, provisions and covenants of this Addendum shall modify said Lease. The Lease Agreement amends and replaces that certain Lease dated May 28, 1985, and its amendments. Uses. 'The Permitted Uses shall include (a) construction of aircraft hangar(s); Rr) flight training, (c) aircraft rental; (d) aircraft sales; (e) hangar rental; (fl hangar storage; (g) miscellaneous aeronautic operations; (h) airframe and power plant repair, (i) avionics; (j) interior/mice use; (k) storage, use, maintenance and repair of aircraft; and p) similar aml related uses. Lessee's Permitted Uses may be by rental, sublease, concession or other similar agreement which will not require the consent of Lessor. 3. Ootlon. Lessee shall have no option to renew tbe thirty (30) year term of this Lease. 4. Leasehold Improvements and MortaaQe. Lessee shall continue to use the hanger and facilities on the Leased Premises and shall have the right to construct a new and additional hangar on the Leased Premises which construction shall be completed 180 days after approval by Lessor of the Plans for such constructioq which will not be unreasonably withheld. All improvements constructed by Lessee on the Leased Premises shall be and remain the property of Lessee through the Lease Term. In connection with such construction Lessee may obtain financing and Lessee shall have the right to grant mortgages to any bank, inc~irance company, other lending institutioq or any governmental agency, covering its leasehold interest created by this Lease, and in and to the improvements and fixtures, furnishings, machinery and equipment located therein and in the event of a mortgage the following terms and provisions shall apply: A. Notices. If arty holder of such leasehold mortgage (herein called "Mortgagee") shall have notified Lessor in writing of the existence of one or more leasehold mortgages, Lessor shall give to such Mortgagee a copy of any notices sent or required to be given to Lessee under the terms of this Lease after the date Lessor is so notified. Such copy shall be addressed to such Mortgagee at the address last furnished to Lessor. In the event of receipt of any such notice from a Mortgagee, Lessor shall not be entitled to deliver a notice to Lessee terminating this Lease or to exercise its right of re-entry unless a copy of any notice of default shall have been given to such Mortgagee as herein above provided and the time specified above for the curing of such default shall have expired without the same having been cured. Arty Mortgagee shall have the right, but not the obligatioq to cure any such default or to perform any condition or agreement to be performed hereunder by Lessee, or to exercise any other right granted hereunder to Lessee, as attorney-in-fact for Lessee. The performance by any such Mortgagee of any condition or agreement on the part of Lessee to be performed hereunder will be deemed to have been performed with the same force and effect as though performed by Lessee. B. Performance of Lessee's Obli ag tions. Lessor will accept performance by arty Mortgagee who has theretofore notified Lessor in writing of the existence of such mortgage, within the following periods of time (which shall be concurrent with the time periods set forth above) of any term, covenant or condition to be performed by Lessee: (i) As to any payment of money within thirty (30) days after notice of such default is delivered to such Mortgagee; and (ii) As to all other defaults, within ninety (90) days after such notice is delivered to such Mortgagee; provided, however, that with respect to any such default which cannot reasonably be cured within such ninety (90) day period, Lessor will accept performance by any Mortgagee if such Mortgagee has commenced to cure such default within ninety (90) days after notice is delivered to such Mortgagee and is diligently and continuously proceeding therewith. Lessor additionally agrees not to exercise any of its rights to terminate this Lease during such reasonable time as any Mortgagee shall require in order to exercise its rights under such mortgage so long and only so long as the Mortgagee proceeds reasonably with its remedies under the mortgage on the leasehold estate and thereafter prosecutes the same with all due diligence to cure any non-monetary default which cannot be cured within ninety (90) days. C. New Lease. Lessor shall also be obligated to give to any Mortgagee who has notified lessor in writing of the existence of its mortgage, any notice of termination given by Lessor to Lessee, simultaneously with giving such notice to Lessee. In the event this Lease is terminated by Lessor, or by operation of law with or without the intent of Lessor to so terminate, the Mortgagee shall then have the right within ninety (90) days after receipt by Mortgagee of such termination notice, or after receipt by law, to notify Lessor in writing that such Mortgagee or any designee or nominee of such Mortgagee elects to enter into a new lease (herein called the "New Lease") leasing the Leased Premises from the date of termination of this Lease for the remainder of the original Lease Term, at the rent and upon the same terms covenants, and conditions as are herein set forth, with the same priority as this Lease and vesting in such Mortgagee, its designee or nominee, all of the rights, titles, interest, powers and privileges which Lessee held hereunder prior to any default hereunder. Lessor shall, on such written election by a Mortgagee, execute and deliver such New Lease to such Mortgagee or its designee or nominee within ninety (90) days after receipt of such request, which New Lease shall be effective as of the date of the termination of this Lease, provided that such Mortgagee shall (i) within ten (10) days after delivery to Lessor of notice of such election, pay to Lessor all rent and other sums due under this Lease up to and including the date of commencement of the term of such New Lease, but excluding arty damages or other claim for rent attributable to the period of time covered by the term of such New Lease, (ii) pay Lessor all reasonable expenses and attorneys' fees incurred by Lessor in connection with the preparation, execution and delivery of such New Lease. Nothing contained in this Section shall be deemed to relieve Lessee from any liability it may have as a result of the breach of arty provision under this Lease, but all rental and other amounts paid to Lessor under the New Lease shall be applied in reduction of Lessee's obligations hereunder, If there is more than one mortgage outstanding at the time of the termination of this Lease, Lessor shall not be required to execute and deliver such New Lease to any Mortgagee, or its nominee or designee, other than to the Mortgagee which Lessee has designated to Lessor in writing as the holder of first lien priority or by an agreement of record between all such Mortgagees covering their respective rights with respell to such new Lease. Lessor, however, shall not be obligated to deliver physical possession of the Leased Premises and Improvements to the Mortgagee or its designee or nominee until such parties shall pay all amounts (including any fees or use charges) due Lessor. In no event shall the Mortgagee be under any obligation or liability whatsoever with respect to any such New Lease entered into by its designee or nominee. D. Mortgagee's Possession. In the event any Mortgagee shall, by foreclosure of its mortgage lien or otherwise, acquire and become the owner of Lessee's rights and interests under this Lease, it is expressly agreed that such Mortgagee shall be obligated and liable under this Lease only during the period of its occupancy of the Leased Premises and shall have no further obligation or liability under this Lease subsequent to its assignment hereof or otherwise beyond the period of its occupancy of the Leased 2 Premises. No acquisidoq by foreclosure of a mortgage lien or otherwise, of Lessee's rights and interests under this Lease by any Mortgagee shall release Lessee of any liability which it may have as a result of any provision of this Lease. E. Estoppel Letter. Lessor shall, if required, confirm to Mortgagee that this Lease sets forth the entire agreement of the parties thereto, is in full force and effect in accordance with its terms, and has not been amended, modified or assigned, expect as herein set forth and state what, if any, offsets or credits against rentals exist, and what rentals are due under this Lease to the date thereof, and what, if arty, defaults by either party or ground for cancellations exist under this Lease. F. Foreclosure. If such Mortgagee succeeds to the interest of the Lessee under this Lease, it shall be bound to all of the terms, covenants and conditions set forth herein from and after its succession to such interest; provided that it and its successors and assigns shall have no corporate or personal liability for the performance of the obligations of the Lessee hereunder, and its liability and that of its successors and assigns for any and all defaults of the Lessee under the terms of the Lease shall be limited to its interest in the Leased Premises, including all improvements, and connection with any foreclosure under the Deed of Trust, or transfer in lieu thereof, or if subsequent thereto, Mortgagee is the successor or in the case of the foreclosure of the Deed of Trust, the Trustee under the Deed of Trust shall be authorized and may assign, transfer or sublease this Lease to any other party without the consent or approval of Lessor. Provided however, any subsequent assignee shall thereupon be bound by the terms and conditions of this Lease. 5. Release of Landlord's Lien. Lessor expressly releases, waives and relinquishes any and all rights to or to claim a statutory landlord's lien or any other type of lien covering any of Lessee's personal property situated upon the Leased Premises. 6. Favored Nations. Lessor, during the term of this Lease, shall not grant fuel sales certificates or leases and shall not permit operations or services on or within the Kerrville Municipal Airport which do not conform to the same standards and covenants set forth in this Lease or which are granted on terms and conditions more advantageous than those provided to the Lessee herein. Lessor shall not assess any use or other charges which are not reasonable in comparison with similar fees charged by other airports of similar size within the State of Texas. In the event of arty dispute, disagreement, controversy or claim arising out of, or related to, any fees charged by Lessor, the parties agree that such dispute, disagreement, controversy or claim shall be determined by binding arbitratioq according to the provisions of paragraph 12 below. Lessor shall not permit, by Lease or otherwise, any car rental operation within the Kerrville Municipal Airport, so long as there is no demonstrated public need requiring certification for additional car rental operations. Except for existing private fuel concessions, Lessor shall not directly or indirectly permit or cause any other private fuel concession or operation at the Kerrville Municipal Airport. 7. Fuel Flowage Fee. The fuel flowage fee on fuel shall be reasonable in comparison with fuel flowage fees charged by other airports of similar size within the State of Texas. The fuel flowage fee used shall be subject to review every 180 days. In the event of any dispute, disagreement, controversy or claim arising out of, or related tq the fuel flowage fee charged by Lessor, the parties agree that such dispute, disagreement, controversy or claim shall be determined by binding arbitration, according to paragraph 12 below. 8. Repair. In the event of substantial damage to any hangar or improvements on the Leased Premises, Lessee shall have the option to (i) either reconstruct, restore and repair the hangar or improvements, or demolish the hangar or improvements and erect new and different hangar or improvements and all insurance proceeds shall be paid to Lessee for such purposes, and in either case to otherwise use and occupy the Leased Premises for the purposes herein provided, subject only to any express restrictions set forth herein or imposed by applicable law or ordinance, or (ii) terminate this Lease, whereupon arty insurance proceeds collected by Lessee pursuant to policies held by Lessee in accordance with this Lease shall be paid to Lessee. Except, if Lessor has become the owner of arty improvements, as herein provided, then the insurance proceeds shall be prorated as between Lessor and Lessee, with Lessee being entitled to that prorated portion of the proceeds based on the ratio of the remaining Lease Term to the entire Lease Term, and Lessor being entitled to the balance of the proceeds. For purpose of the foregoing sentence, 3 "substantial damage" shall be defined as damage to such an extent that the cost to repair and restore the improvements would exceed X50,000.00, plus five percent (5%) per annum for each year after date hereof. 9. Consent. Lessor shall not unreasonably withhold its consent or approval of any matter requiring its consent or approval, including without limitation any subleasing or assignment. 10. Controlling Document. In case of any conflict between the provisions of this Lease and the provisions of Title 3, Chapter V, of the Code of Ordinances of the City of Kerrville, Texas, "Airport Rules, Regulations and Minimum Standards" and any other law, provision or requirement, the provisions of this Lease shall prevail. 11. Lessor Default. Lessor shall not directly or indirectly do, commit or permit to be done or committed, any act, occurrence or condition which impairs or prevents operations of the Leased Premises and the conduct and use of the Leased Premises for the purposes herein specified, including without limitation the services and operations required hereunder. Lessee shall not be in default hereunder if any occurrence constituting a default is caused or results from the acts of Lessor. If the Lessor shall be in default hereunder, Lessee may terminate this Lease or pursue whatever right or remedy as may be available at law or in equity. 12. Binding Arbitration. Binding arbitration shall be conducted under the commercial arbitration rules of the American Arbitration Association (but not using the services of nor an arbitrator named by the American Arbitration Association), which shall be commenced at any time by either parry by filing a demand for arbitration upon the other party or parties. The arbitrator shall be selected by the mutual approval of the parties and if no mutual approval is achieved within thirty (30) days, a~ party may petition a District Judge sitting in Kerr County, Texas, to appoint such arbitrator. The decision of the arbitrator shall be final and binding on all parties. The statute of limitations, estoppel, waiver, laches and similar doctrines which would otherwise be applicable in any action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. All costs for the arbitration shall be equally borne by the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be legally executed in duplicate this day of , 2003. LESSOR: KERRVILLE-KERB COUNTYAIItPORT BOARD By: Dr. John Davis, Chair, Airport Board APPROVED: CITY OF KERRVILLE By: Stephen P. Fine,. Mayor LESSEE: JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, By JLK MANAGEMENT, L.L.C., a Texas limited liability company By: Joseph L. Kennedy, Jr., President COUNTY OF KE TEXAS ~ By~ Pat Tinley, County Judge 4 ATTEST: Brenda G. Craig, City Clerk APPROVED AS TO FORM: Michael C. Hayes, City Attorney ATTEST: Jayjt4ett Pieper, County APPROVED AS TO FO pr°~ t ` _ hy^ °' a ~ ~1V ~~ r OA ~ / ~~ ~ouca D ~ .Mot ,County Attorney THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this day of 2003 by Dr. John Davis, Chair, Kerrville-Kerr County Airport Board, for the KERRVII.,LE-KERB COUNTY AIRPORT BOARD, on behalf of said BOARD. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this / 3 day of ?c%t! ~ 2003 by PAT TINLEY, County Judge, for COUNTY OF KERB, TEXAS, on behalf of said COUNTY OF KERB, TEXAS. :•~.. ~•q-A;~~• •~ HELENA HANNA r , •~~ ~ NOTARY PUBLIC ~-~1 ~./ State of Texas / •~'~ ~~ ~ ' ~ c01"m' ~~ 06 p 2004 Notary Public, State of Texas ••... • THE STATE OF TEXAS COUNTY OF KERB This instrument was acknowledged before me on this day of 2003 by STEPHEN P. FINE, Mayor of the CITY OF KERRVII.,LE, TEXAS, on behalf of said CITY OF KERRVII,LE, TEXAS. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB § This instrument was acknowledged before me on this day of 2003 by JOSEPH L. KENNEDY, JR., President of JLK MANAGEMENT, L.L.C., a Texas limited liability company, General Partner of JOSEPH L. KENNEDY ENTERPRISES, LTD., a Texas limited partnership, on behalf of said partnership. Notary Public, State of Texas 6 COMMERCIAL LEASE AGREEMENT AMONG THE h'ERR`7LLE-IiERR C'OiT1VTY AIRPORT BOARD, THE CITY OF KERRVILLE, TEXAS, THE COUNTY OF I{ERR, TEXAS AND JOSEPH L. KENNEDY ENTERPRISES, LTD., A TEXAS LIMITED PARTNERSHIP THIS LEASE AGREEMENT, made this _ day of la •2003, by and among the [:c~rville-Kerr Counh• Airport Board QrnernirrQ hoard of the l~cxn ille Isar Counri• airport pursuant fi the Tomas Municipal lirport Act Tav. "I'ran5portahon Code Chapter 22 hereinafter called the "Board,": the City of Kerrville, Texas, a home rule municipal corporation. hereinafter called "CiiyF; and the County of Kea, Texas, a political subdivision of the State of Texas, hereinafter called "County". r~~'d. City and County sometimes collectively Fefeared to as "Lessor"), avd Joseph L Kennedy Enterprises, Ltd., Texas limited paRnaship, whose principal offices are bcated in Kerrville, Texas, hereinafter refereed to as "Les a". ~~ (~ _ /"'"e~~"°~ ~~ `•' _ ) ~ RECITALS T'-" OelaUad; March Dektad; °, Deletieal: being ~~" ~' 4 WHEREAS, the Lessor owns and operates the Kerrville-Kerr County Municipal Airpaa-t, located in the City of Kerrville, Texas, hereinafter referred 1a as "Airport", and; WHEREAS, Lessee desires to lease certain Lesser-owned land at the Airport to construct certain improvements and ~ engage in certain aera-autical-related services to be provided to the public as hereinafter permitted; and NOW, THEREFORE, for and in consideration of the covenants and conditions herein stated, Lessor and Lessee agree as follows: ARTICLE 1. GRANT OF LEASE 1.01 Leased Premises: Lessor agrees to lease to Lessee certain properly owned by Lessor located at the Airport and being more particularly descaibed as Lets 9 and 10, and a 0.253 acxe portion of Lot 11, as shown on the map recorded in Volume 6, Page 331 of the Real Property Records of Kean County and as indicated on the Leased Premises Map and Exhibit A as attacdred hereto, together with all improvements thereon and fixtures attached thereto, hereinafter being referred to as the "Leased Premises." Lessee shall construct the improvements on the Southern portion of Lot 9 and within sixty days of the completion of the oonsiruction by Lessee of the hangar and related facilities on the Leased Premises, and issuance of a certificate of occupancy by the City, Lessee shall, at Lessee's sole cost and expense, have the Leased Premises surveyed ("S~rrvey'~ and shall have this survey recorded among the official properly records of Ken County, Texas. Within 30 days from the date of the completion of the survey, Lessee sha0 release the North portion of the Leased Premises not occupied by said hangar, related facilities and paving from this Lease. Based upon such sruvey, Lessor and Lessee shall enter into an amendment of this Lease specifying the legal description of the Leased Premises and the rent shall be adjusted based upon the Survey as provided for in Article 3. 1.02 Release of Improveme~s: Lessee agrees to transfer ownership of the improvements on Lot 10, specifically the building laaown as the "blue hangar," on June 30, 2015, to Lessor, aad further agrees to timely execute arty and all documents necessary to accomplish transfer of ownerslp of the building m Lessor. 1.03 Easemerrts: This Agreement shall be subject to such easements, rights-of--way, drill sites, or other rights or reservations affecting the Leased Premises which are of record or are clearly visible as of the date of this Agreement. ARTICLE 2. TERM OF AGREEMENT 2.01 Lease Term: This Ageernent shall commence at 121 am. on~tati~ ~, 2003, and terminate at midnight on ~1ay ~ 2033, ("the Lease Term") unless terminated earlier pursuant 1o the provisions of this Ageement 2.02 Optional Extension of Lease Term: Deleted. 2.03 Holdover of Lessee: if Lessee holds over or remains in possession of the Leased Premises after the ternination of this Agreement in the absence of a new lease agreement between the Lessor and Lessee, such continuation beyond the date of termination, or the collection or acceptance of rent, fees and/or other charges by the Lessor, shall not be construed as a renewal or eactension of this Ageemen; but shall be construed solely as creating a tenancy at will and not for arty other term whatsoever. During the term of such tenancy at will, Lessee shall pay to Lessor the fees and charges herein reserved, and Lessee shall be bound by and comply with all the relevant provisions of this Agreement. The Lessor may laminate the tenancy at will by giving Lessee thirty (30) days written notice thereof. ARTICLE 3. RENT 3.01 Amount of Base Rent: Lessee agrees to pay to Lessor rent for the Leased Premises St, lOper~uare foot perms for the period con-mencing ao the date hereof until amd including June 30, 2005, at whidr time the base rent shall be recalwlated and adjusted annually according b the Consumer Price Index as defined ands Section 3.02 of this Lease, below. The total rent due by Lessee during this irritial period will be modified as folbws: within ninety (90) days after the issuance of the certificate of occupancy for the newly constructed improvements described in Article 5 and Section 1 Al haeoi; and recordation of tbe survey as required in those sections, the rent due will be adjusted bo reflect the change in square fOO1aQe, if any, resulting from the survey and release of part of Lot 9. The total rent due shall also be adjusted on June 30, 2010, in that the base rent shall corrtimre b be 10 per,RSCltlare foot per year (as atijusted~ but the total rent due shall be increased by $500.00 per month to accotmt for rental value of the improvements existing on Lot 10 on that date. As further consideration for the rental value of the improvements existing on Lot 10, the total rent due shall be iraxeased by $250.00 per year, with said increases occurring on June 30 of 2011, 2012, 2013, and 2014. The cartel value for the improvements existing on Lot 10 om June 30, 2015 shall then be determined by using the base cartel rate of $1,800.00 for the impmvememts on Lot 10 as of the date of exewtion hereof, as that amount may be incxeased or decreased by changes in the Consumer Price Index during the intervening period, using the same methodology specified in 3.02, below. 3.02 Ad'usttnent of Rent During Lease Tam: During the Lease Terns, the rent price per,~quare foot to be paid by Lessee shall be increased or decreased on each anniversary of the effective date of this Agreement in accordance with changes in the Consumer Price Index for all Urban Consumers (Southern Urban Area) (the "Consumer Price Index") as promulgated by the Bureau of Labor Statistics of the United States Deparhnent of Labor, which Consumer Price Index for January 2003 is 175.1(the "Base Index's using the year 1984 as a base of 100. The Base Rent to be paid during the tam of this Ageement shall bear the same ratio to the Consumer Price Index for the month of January preceding the date of Use rent adjustment as ~tle original "$. ] 0 tx~r square foot per year" bears to the Base Index. In rro even; however, shall the rent due be less than 10 per. rsguare foot per. c;ar In the event the Consumer Price Index ceases to incorporate a significant numbs of items, or if a substantial change is made in the method of establishing such Consumer Price Index, shear tbe Consumer Price Index shall be adjusted to the figure that would have resulted had m change ocwrred in tbe manner of computing such Consumer Price Index. In the event such Consumer Price Index (or a successor or substitute index) is not available, a reliable govetmnental or outer nonpartisan publication, evahrating the information thereto for use in determining the Consumer Price Index, shall be used in lieu of such Consumer Price Index. Deleted: March Deleted: the March "~ y^ _~ f"' Deleted: 132.22 Debted: acre Debted: month Deleted: acreage Deleted: 132.22 Debted: acre Deleted: per month Deleted: acre Deleted: --~ Deleted: 5132.22 Deterred: 13222 Deleted: a~ae Delefisd: month. 3.03 Deleted. 3.04 Deleted. 3.05 Deleted. 3.06 Delivery of Rent All payments required of Lessee by this Agreement shall be delivered by mail, or in person, to the Office of the Directs of Public Works, City of Kerrville, Texas, 800 Junction Highway, Kerrville, Texas 78028, or m such other location as specified in writing by the Lessor from time tb time, no later than the first day of each calendar month of the Lease Term for which the payment is due, unless such due date falls on a Saturday, Sunday, or legal holiday, in which case such rent shall be due on the first City business day followirg the date such payment is due. 3.07 Delinquent Rent Payments: In the event that payments to the Lessor for rent or other fees or charges are not received by the Lessor on or before the tenth day following the due date, Lessee shall pay a late rents.( charge of Two Percent (2.0%) of the rent amount due for that month. All rent and other payments which are past due more than thirty (30) days shall accrue simple interest at the rate of eighteen percent (18.0%) annually or (b) the maximum percentage rate allowed by law, whichever is less. Nohvithstanding anything to the contrary in this Section 3.07, if at the time performance of the provisions set forth in this Section 3.07 becomes due the interest to be paid in accordance with this Section 3.07 exceeds the limits on the payment of interest established by law, then the amount of inteaest to be paid shall be reduced to the maximum limit allowed by Iaw, furthermore, i1; from any circumstances, Lessor should ever receive as interest an amount that would exceed the highest lawful rate, the amount that would be excessive interest shall be applied to the payment of rent owing pursuant to the provisions of this Lease Agreement and not m the payment of interest. 3.08 Application of Amounts Received: Payments received shall be applied in the following order: (1) interest accrued for Tate payments, (2) Iate rental charges, (3) past due rent beginning with the oldest amount due, (4) other past due amounts, (5) rent wrrently due, and (6) other amounts currenHy due. 3.09 Other Char¢es: Nothing herein shall be deemed ~ relieve Lessee and its tenants, sublessees, patrons, invitees and others from Airport use charges, inchding fuel flowage fees paid on fuel purchased by Lessee, as are levied generally by the Lessor directly upon the operation of aircraft, or from automobile parking permit fees for parking areas that are not included within the Leased Premises, or fiom security fees. ARTICLE 4. USE OF LEASED PREMISES 4.01 Permitted Uses: Lessee shall be permitted to use the Leased Premises for the purpose of conducting for- profit commercial aeronautical services or activities consisting of any or all of the following operations and tto others: See Addendum attached hereto and made a part hereof for all purposes. Such other uses as may be permitted in writing by the Lessor. 4.02 Prohibited Uses: Lessee agrees at all times to comply with the following: A. Lessee shall at no time use, or pernrit the use of the Leased Premises in a manner that is contrary to applicable federal, state, county or city laws, orders, ordinances, rules, or regulations, which shall include, but not be limited to, applicable Federal Aviation Administration rules and regulations and applicable regulations far the use of the Airport as may from time to time be promulgated by the Lessor, B. Lessee shall not permit any permanent unshielded light or illumination source to cause glare as viewed from any street adjacent properties or operating aircratty C. Lessee shall not cause or permit the burial or storage above ground on the Leased Premises of any hazardous waste or materials, as definexl by federal or state law, except in accordance with applicable federal, state, county or city laws, orders, ordinances, regulations and rules, as may be adopted or amended from time to lime; D. Lessee shall not cause or permit any use or activity on the Leased Prarrises that would create a hazardous condition for aircraft operating at the Airport; E. Lessee shall not allow the Leased Premises to be used for parking of motor vehicles, motorcycles, or motor driven equipment by anyone other than customers, employees, or contractors of Lessee except as may be authorized by the Director of Public Works, with all such parking being limited to areas designated by Lessor for such parking. Lessee shall not be in default for the improper parking of vehicles over which neither Lessee nor any of its subtenants, customers, employees, or contractors have any control; F. Lessee shall not allow scheduled airline passenger operations to be conducted on the Leased Premises. G. Lessee shall not permit aircraft to access the Leased Premised from outside the Airport property such that such access would constitute a "drrough the fence" operation prohibited by contracts between Lessor and the State of Texas or the United Slates of America. 4.03 Compliance with Minimum Standards: All activities conducted upon the Leased Premises, whether by Lessee or its officers, employees, contractors, or agents, shall be in substantial conformance with Title 3, Chapter V, of the Code of Ordinances of the City of Kenville, Texas, "Airport Rules, Regulations, and Minimum Standards", as such regu[ations exist or may be duly amended from time to time by the Lessor to the extent that such regulations apply to Lessee's operations. 4.04 Non-exclusive Uses: Lessee understands and acknowledges that as ~ that part of the Airport not inchrded within the Leased Premises, the allowable uses permitted herein are on a ran~xclusive basis with respect ~ other potential providers of aeronautical services at the Airport. ARTICLE 5. OBLIGATIONS OF LESSEE WITH REGARD TO CONSTRUCTION OF IMPROVEMENTS 5.01 Application for Building Permit: Upon execution hereof; Lessee shall make application for a building permit ("Pexrrrit'~ with the appropriate governmental agency on or before 90 days from date hereof for tine construction of the facilities necessary to cant' out the purposes described in Section 4.01 above, and shall pursue issuance of such Permit with reasonable diligence. Lessor agrees to cooperate with Lessee in obtaining such Permit. Such facilities to be constructed shall include a hangar on the southwestern-most portion of Lot Sand aself-fueling depot. 5.02 Atraoval of Construction Plans: Not later than 90 days after commencement of the Lease Term and prior to any construction, alteration, a changes to ilre Leased Premises, Lessee shall submit to the City's Airport Manager scaled plans and specifications of such construction, and a site use plan with all drainage and utility services as existing or proposed indicated thereon. Lessee is solely responsible for ascertamirrg the requirements of arty and all, federal, state, or local govermnent agencies with regard to permit and application procedwes necessary to obtain fmal approvals and building permits prior to begirmirrg any ebnshvction on the Leased Premises. Lessee shall not commence any construction until it has received prior written approval from Ure Airport Manager and until the Lessee or the Lessor or both have received the necessary approvals from the Federal Aviation Administration, the City's Building Official, and such other governmental authorities as are necessary far the type of construction contemplated. In those instances in which the Lessor is required to make application for construction or alteration of the Airport due to the Lessor being the holder of the Airport Operating Certificate, the Lessor ogees to promp8y and diligently make and prosecute such applications. Once necessary approvals and permit(s) have been obtained, Lessee shall, not later than 180 days after issuance of approval and permit(s), solely and entirely at Lessee's cost risk and expense, commence to construct, build and erect the Improvements in accordance with the fmal oacstruction plans and specifications hereinabove mentioned. 5.03 Ccxnpktion Requirements for Se1~Fueaing De~o~ Lessee agrees b complete installation and establish Formatted: No underline operation of the self-fueling depot within 180 days from the date hereof. 5.04 Approval of Plans Not Assurance of I~ Ouality: The approval by the Director of Public Works or arryone else acting on behalf of Lessor of any plans and specifications applies only to the conformity of such plans la the general architectural and operational plan for the Leased Premises and the Airport. The approval of the Director of Public Works does not constitute approval of the quality of the architectural or engineering work performed. Neither Lessor nor the Director of Public Works assumes arty liability or responsibility for the architectural or engineering design or for arty defect in any building or improvement constructed 1mm the plans or specifications. Construction of any contemplated improvements shall be in accordance with the plans presented m and approved by the Director of Public Works. All construction work shall be subject to inspection by a representative employed by the Lessor or an inspector from the City's Planning and Development Services Departrnent or both, to determine that such work conforms to the plans and specifications approved by the Lessor. 5.05 Contractor's Insurarce: Bonds: At any time construction activities are undertaken on the Leased Pranises, Lessee shall require that its contractor or contractors keep in force insurance issued by a responsible insurance comparry or companies authorized to conduct business in the State of Texas insuring the improvements during construction under Completed Builder's All Risk Insurance, including fire, exuded covaage, vandalism and malicious mischief; in an amount equal to the full insurable value of such construction as the same progresses in order to insure continuity of construction and ultimate completion despite damage ar destruction suffered during the course thereof. Ftvtheamore, Lessee shall require all contractors performing conslnartion work on the Leased Premises to provide payment and performance bonds issued by a responsible bonding company or companies authorized to conduct business in the State of Texas for the full amount of the cost of the construction to be performed on farms which are in compliance with Chapter 2253 of the Texas Government Code, as amended. The foregoing shall be made a part of any contract between Lessee and its contractor or oontracbors. In the event Lessee does any conshuction work itself it shall comply with theall-risk insurance provisions hereof. 5.06 ComnGance With Baildina Codes and Federal Standards: All improvements made to the Leased Premises by Lessee shall comply with all applicable City Building Codes and Federal standards far construction of airport improvemants in effect at the time construction commences as well as all other applicable federal aviation regulations, if any. 5.07 Encumbrance of Leasehold Estate: Lessee may encumber its leasehold interest in the Leased Premises by dead of trust mortgage, seanity agreement or other severity interest without the prior written consent of the Lessor as set forth in the Addendum attached hereto. 5.08 Ownership of Building,Sy Itriprovanents and Fixtures: Arty and all buildings improvements (including, but rwt limited b all aprons, taxiways and roadways), additions, alterations, and fixtures existing on the Commencement Date or constructed or placed on any part of the Leased Premises during the Lease Term by Lessor or Lessee, shall be consida~ed part of the real property of the Leased Premises, shall remain on the Leased Premises, and shall not be removed by Lessee or airy sublessee without the written consent of Lessor. Except as otherwise provided in this Lease or an Addendum hereto, improvements, additions, alterations, and fixtures on the Leased Premises shall become the sole property of Lessor upon termination of this Agreement without compensation bo Lessee, it being understood and agreed by Lessee that the transfer of title to the Lessor of the buildings attd improvements located on the Leased Premises at the end of the Lease Term is additional consideration for this Agreement. Notwithstanding the above, Lessee shall have the right at arty time during Lessee's occupancy of the Leased Premises, or within a reasonable time thereafter, to remove any and all furniture, machinery, equipment or other trade fixtures, owned or placed by Lessee, in, under, or on the Leased Prerttises; provided, however, prior to the termination of the Lease Term, Lessee shall repair arty damage to any buildings or improvements on the Leased Premises resulting from their removal. Any such personal properly items or trade fnrfures which are not removed within sixty (60) days after the termination date of this Agreement shall become the property of Lessor as of that date. 5.09 Failure to Conshnrct Improvements: Lessor shall have the right, exercisable at its sole option, to terminate this Lease Agreement if A. Lessee fails to commence construction of the improvements required to conduct Lessee's operations on the Leased Premises on or before the 180th day after commencement of the Lease Term; or B. after oonslnrction of the required improvements has commenced, Lessee fails 1o complete construction of the improvements on or before the second anniversary of commencement of construction. 5.10 Availability of Sanitary Sewer: Lessee understands and aclmowledges that the Leased Premises is not served with sanitary sewer service as of the commencement of the Lease Tenn. Lessee shall be solely responsible for installing and maintaining at Lessee's cost an on-site sewage facility that complies with all applicable state and local regulations with sufficient capacity iD provide sanitary sewer disposal for Lessee. If City extends a sanitary sewer collection main adjacent to the Leased Premises, Lessee agrees it will corisltuct a sanitary sewer service line to connect to the sanitary sewer collection main not later than 180 days after receiving written notification from Lessor that the sanitary sewer collection main is complete aril ready m receive waste. If Lessee has constructed its facilities and is operational at the tiune of the extension of sanitary sewer service to 8re Leased Premises, Lessee shall not be required to pay a capital recovery fee to the City as otherwise required by ordinance upon comeection tb City's sanitary sewer system. 5.11 Di a to Sanitary Sewer, Pre-treatment: Lessee shall at rro time discharge or allow lire discharge of any substance into City's sanitary sewer system that is otherwise prohibited by federal, state, or local law, ordinance, or regulation. In the event that pre-treatment of waste is required prior m the discharge into the City's sanitary sewer system of waste generated from the Leased Premises, Lessee must construct such pre-treatment facility at its sole expense in caripliance with applicable federal, state, and local laws and regulations. ARTICLE 6. REPAIRS. MAINTENANCE AND RESTORATION 6.01 Maintenance by Lessor: Lessor shall, at Lessor's sole expense, keep in good repair, condition and appearance the taxiways and roadways which have been or may be constructed by Lessor. Lessor shall commence required repairs as soon as reasonably practicable after receiving written notice from Lessee thereof. 6.02 Maintenance by Lessee: Lessee shall, at Lessee's sole expense, keep the Leased Premises and all improvements of any kind, which may be existing at the commencement of the Lease Term or erected, installed, or made thereon by Lessee after commencement of the Lease Tenn, not required herein to be maintained by Lessor in good repair, condition and appearance. Lessor shall be the sole judge of the quality of Lessee's maintenance; provided, however, Lessor shall not unreasonably withhold acceptance of said repairs or maintenance. Upon written notice by Lessor to Lessee, Lessee shall be required to perform such reasonable maintenance under this Section 6.02 as Lessor considers necessary. If Lessee does not undertake such maintenance within ten (10) days after receipt of written notice, Lessor shall have the right to enter on the Leased Premises and perform the necessary maintenance, the cost of which shall be borne by Lessee. Subject to the provisions of Section 5.07, on the last day of the Lease Term, or on any sooner termination, Lessee shall surrender the Leased Premises to Lessor in the same condition as received and clean and free of debris, except for fire and casualty damages or ordinary wear and tear. 6.03 Trash and Waste Removal: Lessee agrees to cause to be removed from the Leased Premises, at its own expense, all waste, garbage and rubbish and ogees not to deposit same on the Leased Premises except temporarily in waste or garbage containers provided by Lessee at Lessee's expense. Lessee further agrees that Lessee will store all parts, supplies, and other materials on the interior of buildings located on the Leased Premises, provided, however, that any parts or supplies which must be kept outside because of volatility of the supply item or the size of the part will be kept out of view of the public traveling on public rights of way or other surrounding tenants by installation of fencing or other means of screening approved by the Airport Manager. ARTICLE 7. ACCESS TO AND USE OF AIItPORT 7.01 Access ib Airport: Lessor shall maintain all roads on the Airport giving access to the Leased Premises in good and adequate condition for use by cars and trucks and shall maintain free and unintemzpted access to the Leased Premises over said roads at all times; provided, however, Lessor shall rmt be in default of this Agreement if access is interrupted for any of the reasons set forth in Section 16.03, below. 7.02 Right to Use Airport: Lessee and Lessee's officers, employees, agents, contractors, invitees, and guests shall have the right to use that part of the Airport and its facilities not included within the Leased Premises in common with others authorized to do so. Such use shall be subject b any and all applicable federal, state err local laws, ordinances, statutes, rules, regulations, or orders of arty governmental authority, lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including any limitations, restrictions or prohibitions affecting the aviation activities or operations of Lessee. 7.03 Vehicular Operations on the Airfield: No vehicles of Lessee, its officers, employees, agents, contractors, invitees, and guests will be operated on, or cross, the runways of the Airport except pursuant m the Airport Rules and Regulations. 7.04 Airport Certification Ides and Reputations: Lessee shall comply with such rules that pertain to its operation on the Airport under the Airport Certifications Rules of Federal Aviation Regulations Part 139, as amerxled [ 14 CFR Part 139, as amended], to the extent such regulations are applicable to the operation of the Airport. 7.05 Airport Security Rules and Regulations: Lessee, its officers, employees, agents, contractors, invitees, and guests shall comply with all federal and local Airport Security Regulations adopted by the Lessor as such rules and regulations exist or may hereafter be amended. LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS THE LESSOR TI'S OFFICERS AND EMPLOYEES, Born any charges, Ernes or penalties that may be assessed or levied by the FAA or the Texas Departrnent of Transportation by reason of the NEGLIGENT OR INTENTIONAL FAILURE OF LESSEE. TTS OFFICERS. EMPLOYEES, AGENTS, CONTRACTORS. INVITEES. AND GUESTS In comply with such Airport Security Regulations. 7.06 14 C.F.R. Part 77 Requirements: Lessee agrees to comply with the notification and review requirements set forth in Part 77 of the Federal Aviation Regulations [ 14 CFR Part 77J in the event any furore structure, antenna or building is planned far the Leased Premises, or in the event of eery planned modification of any present or firdue building anterma or structure located on the Leased Premises. 7.07 Control of Structures: Lessee shall not erect nor permit the erection of any structure or object; nor permit the gowflr of any tree ~ the Leased Premises which highest point is above a mean sea level elevation established by the FAA and Lessor as a height limitation on such structures or objects. Lessor reserves the right to enter upon the Leased Premises and to remove the offending shoelace or object and cut the offending tree at Lessee's expense. 7.08 Axial Approaches: Lessor reserves the right >a take any action it considers necessary to protect the aerial approaches of the Airport against obstruction together with the right to prevent Lessee from erecting or permitting b be erected any building or other strucdffe on or adjacent to the Airport which, in the opinion of the Lessor, would limit Lire usefulness of the Airport or constitute a hazard to aircraft. 7.09 Ri¢!rt of Overfli¢Itt: There is hereby reserved ~ the Lessor, far the use and benefit of the public, a right of flight for the passage of aircraft above the surface of the Leased Premises, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft, now known or hereafter used for navigation of or flight in the air, using said airspace for landing at, taking off from or operating on the Airport. ARTICLE 8. INSURANCE 8.01 Lessee's Minimum Insurance Amounts: Lessee shall obtain and maintain continuously in effect at all times during the Lease Tarn, at Lessce's sole expense, at least the following minimum insurance with a carries or carriers licensed to do business in the State of Texas and satisfactory to the Lessor: A. Commercial General Liability Insurance against claims for bodily injury, death, or properly damage occurring on, in or about the Leased Premises, or any other portion of the Airport, in at least the amount of $1,000,000.00 pa individual, $2,000,000.00 per oceun'ence and $1,000,000.00 with respect to property damage. In the event that the Texas Torts Claims Act, as amended (Tex Civ. Prac. & Rem. Code §101.001, et seq.) or its successor statute, is amended to increase the amount of liability of municipalities for acts described in said Act above the levels set forth in this Section 8.O1.A, Lessee agrees to increase the amount of insurance coverage required by this Section 8.O1.A. to an amount sufficient to provide coverage to the level of potential liability per occurrence under said Act; and B. Automobile Liability Coverage on all motor vehicles owned andfor operated by Lessee or its employees on the Leased Premises or other Airport property in amounts of not less that $500,000.00 combined single limit or equivalent; provided, however, separate automobile coverage shall not be required if such coverage is provided under Lessee's comprehensive general liability policy. C. Properly and Casualty Insurance on improvements constructed on the property, whether owned by Lessee or Lessor, insuring against loss or damage to improvements due to fire, lightning and all other perils inchrded in standard extended coverage policies, and vandalism and malicious mischief, all in amounts of not less than ninety percent (90%) of replacement value; D. If required pursuant to Article 3-V-10(a.x2) of the Code of Ordinances of the City of Kerrville or its successor ordinance, Hangarkeeper's Liability coverage in the minimum amount of $1,000,000.00 per occurrence unless similar coverage exists under the required gcncral liability policy; E. Environmental Liability Coverage in the amount of not less than $1,000,000.00 per occurrence. 8.02 Lessee's Coverage Primary: All insurance herein required shall apply as primary a~ not in excess of or contributing with other insurance which the Lessee may carry. Insurance provided pursuant to Section 8.01 shall name the Lessor as an additional insured or loss payee as the case may be. The comprehensive general liability policy as provided in paragraph 8.O1.A. shall provide contractual liability coverage sufficiently broad so as to include the liability assumed by Lessee in the indemnity and hold harmless provisions included in Article 9 of this Agreement. 8.03 Contents of General Liability Policy: Lessee's Comprehensive General Liability policy shall protect the Lessor and Lessee against a~ and all liability &~ arry person or perscros whose properly damage or personal injury arises out of or is in connection with the occupation, use, err condition of the Leased Premises or resulting from any injury or damage occurring on or about the roads, driveways or other public areas of the Leased Premises used by Lessee, its officers, employees, agents, contractors, invitees, and guests at the Airport, wbethe or not such damage or injury is the result of negligence of the Lessee or its offices, employees, agents, contractars, invitees, and guests. 8.OA Cancellatioe; Certificates of Insurance: Lessee's insurance as required by this Agreement shall not be subject to cancellation or material alteration until at least thirty (30) days written notice has been provided to the Lessor. Lessee shall furnish to the Lessor, annually, Certificates of Insurance showing Lessor as an additional insured and evidencing that all of the herein stated requirements have been met. 8.05 Lessor's Rieht to Purchase Insurance: In the event such insurance as required by Section 8.01, above, shall (apse, the Lesser reserves the right to obtain such insurance at Lessee's a~ense. Upon demand from Lessor, Lessee shall reimburse Lesser for the full amount of the premium paid on Lessee's behalf. ARTICLE 9 INDEMNITY 9.01 Geneally: LESSEE AGREES TO INDEMNIFY. DEFEND. AND HOLD HARMLESS THE CITY COUNTY. AND THEIR RESPECTIVE OFFICERS. EMPLOYEES AND AGENTS from and against arty and all loss, damage, liability, claims, demands, costs, charges, agxnses and causes of action including all costs of defense thereof (and including reasonable attorney fees) of whatsoever character which the Lessor may incur, sustain, or be subjected bo on account of loss, damage la property and loss tltereof and for bodily injury to or death of any persons (including but not limited 1o the properly, empbyees, custamer~ contractors, agents, invitees and licensees of each party hereto) ARISING O__UT OF THE CONDUCT OR OPERATIONS. NEGLIGENT OR OTHERWISE OF LESSEE TI'S DIRECTORS. OFFICERS. EMPLOYEES, SUBLESSEES CONTRACTORS SUBCONTRACTORS OR AGENTS on the Leased Premises. The Lessor will give Lessee prompt notice of any claim made or suit instituted which in any way affects or might affect $e Lessor. Similarly, Lessee will accord the Lessor the same notice and rights. 9.02 &tvironmental Matters: LESSEE AGREES TO INDEMNIFY. DEFEND AND HOLD HARMLESS CITY. COUNTY. AND THEIR RESPECTIVE OFFICERS EMPLOYEES. AND AGENTS from and against arty lass, costs, damages, claims, assessments, fines, andlor penalties (including reasonable attorney's fees) (together referred ~ as "Losses'") which may be incurred by or levied against ANY OF THOSE HEREIN INDEMNIFIED BY ANY THIRD PARTY. INCLUDING BUT NOT LIMITED TO. THE U.S. ENVIRONMENTAL PROTECTION AGENCY OR THE TEXAS NATURAL RESOURCES CONSERVATION COMMISSION OR THEIR SUCCESSOR AGENCIES as the result of Lessee's constructioq operation, or maintenance of any aircxaft painting and refinishing facility on the Leased Premises. As used in this Section 9.02, the teen Losses shall include, but not be limited to, any losses, costs, damages, claims, assessments, fines err penalties, including but not limited m cost of remediation, resulting from the contamination of arty soil, water, err air by hazardous materials discharged by Lessee, or by Lessee's offices, employees, agents, sublessees, invitees, licensees, guestq trespasses, or oonhactor;, either intentionally or negligently, inb the soil, water, or air. ARTICLE 10. UTILITIES Lessee shall be solely responsible for the payment of all electric, telephone, water, refuse, natural gas and other public utility services used on the Leased Premises. ARTICLE 11. SIGNS 11.01 Consent Required: Except with the prior written wnsent of the Airport Manage, which shall not be unreasonably widilreld, Lessee shall not erect, maintain or display any signs or any advertising a; or on, the anterior part of struchires on the Leased Premises, or inside any buildings located on the Leased Premises so as to be visible through the window or exterior doors thereof. 11.02 Removal on Termination: Upon the termination of this Agreement, Lessee shall remove, obliterate or paint out, as the Lessor may direct, any and all signs and advertising on the Leased Premises or elsewhere at the Avport, and in connection therewith shall restore the Leased Premises to the same condirion as prior to the placement of any such signs or advertising. In the event that there is a failure by Lessee to so remove, obliterate or paint out each and every sign or advertising and so to restore the Leased Premises, the Lessor may, at its option, perform the necessary work at the expense of Lessee, and the charge therefor shall be paid by Lessee to the Lessor on demand. In certain cirarmstances, the Lessor may elect to allow specific signs to remain at the termination of this Agreement. Such signs shall be identified and agreed upon mutually, in writing, by Lessee and Lesser. ARTICLE 12. ASSIGNMENT AND SUBLEASING 12.01 Assiemnent by Lessee: At no time shall Lessee sublease any portion of the Leased Premises ~ assign its interests or obligations in this Lease Agreement without the written consent of Lessor. Any such assigranent or attempted assignment without Lessor's consent to same shall be void. 12.02 Assienrnent by Lessor. Lessor may transfer abe assign this Agreement to any successor in interest of Lessor to whom the Airport may be sold or assigned; provided that the successor in ingest shall exewte and deliver to Lessor, with copy to Lessee, an insh-rrment assuming the lawful obligations of Lessor under this Ageement. ARTICLE 13. TAX LIENS Lessee shall be solely responsible for the collection and payment of all applicable federal, state, and local taxes, inchrding, but not limited to, sales, use, fuel, amusement; or excise tax required to be collected and paid over by Lessee to the appropriate taxing authority. Furthermore, Lessee shall be responsible for the payment of any applicable ad valorem taxes and any taxes on Lessee's personal properly located on the Leased Premises. Lessee shall at no time permit the foreclosure of arty tax liens ~ Lessee's leasehold interest in the Leased Premises or the buildings, fixtures, or other improvements located on the Leased Premises. The Lessor shall have the right to pay such taxes due after Lessee's refusal to pay such taxes, and upon demand Lessee shall reimburse the Lessor for the amount of taxes paid plus any petalties, interests, and attomey's fees incurred, subject to Lessee's right to challenge the validity of such taxes in whole or in part. In the event that Lessee is successful in any challenge regarding the payment of any tax, the Lessor shall be subrogated m arty recovery obtained by Lessee to the extent of the amount of taxes, interests, penalties, and attorneys fees previously paid by die Lessor and not already reimbursed by Lessee. ARTICLE 14. DEFAULT AND REMEDIES 14.01 Default by Lessee: The following shall be deemed to be events of default by Lessee under this Agreement. A. Lessee shall fail to pay when due any installment of rent or any other payment required pursuant to this Agreement; B. Lessee shall abandon any substantial portion of the Leased Premises; 10 C. Lessee or any guarantor of Lessee's obligations hereunder shall file a pelition or be adjudged bankrupt or insolvent under arty applicable federal or state bankruptcy or insolvency law or admit that it cannot meet its financial obligations as they become due, or a receiver or trustee shall be appointed for all or substantially all of the assets of Lessee or any guarantor of Lessee's obligations hereunder; D. Lessee or any guarantor of Lessee's obligations hereunder shall make a transfer in fraud of creditors or shall make an assignment for the benefit of creditors; E. Lessee shall do or permit to be done any act that results in a lien being filed against the Leased Premises; F. The liquidation, termination, dissolution of Lessee or any guarantor of Lessee's obligations hereunder; or G. Lessee shall be in noncompliance with any other term, provision or covenant of this Agreement, other than those specified in subparts A. through F. above. 14.02 Termination Upon Lessee's Default: Except far an event of default resulting &am the filing of a petition in bankruptcy, if an event of default by Lessee shall continue for ten (10) days efts service of notice of such event of default by Lessor to Lessee, Lessor may give notice of its election to temunate this Agreerr-ent, and thirty (30) days after service of such notice of election to terminate, this Agreement shall cease and terminate as if the day of Lessor's election was the day originally fixed for termination of this Agreement. Such election m terminate by Lessor shall not be construed as a waiver of any claim it may have against the Lessee consistent with such terninaton. It; however, the event of default is of such nature that it cannot reasonably be remedied within ten (10) days efts receipt of notice by Lessee, and if the Lessee shall have commenced curing such event of default within ten (10) days after receipt of such notice, and shall continuously and diligently proceed in good faith m cure such event of default, then the period for acing the event of default shall be extended for such length of time as is reasonably necessary to cure the event of default. Furthermore, if the event of default is the result of Lessee filing a potion in bankruptcy, then termination shall not oaur unless the trustee in banknuptcy has failed to ratify this lease within sixty (60) days following the date of filing of the petition in bankruptcy. 14.03 Abandonment of Business by Lessee: Lessee further ogees that the abandonment for a period of thirty (30) days by Lessee of the conduct of its business activities at the Airport shall terminate Lessee's rights ands this Agreement. By so temrinatirrg this Agreement; Lessor does not waive a~ other claim or rights against Lessee. For the purposes of this paragraph, the term "abandonment' shall mean the faihrre of Lessee b be open for business on the Leased Premises except in the case of war, spike, calastoptre or causes beyond Lessee's control. 14.04 No Remedv Exclusive: No remedy herein conferred upon or reserved to the Lessor or Lessee is intended ~ be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and stroll be in addition ~ every other remedy given ands this Agreement or hereafter existing under law or in equity. No delay or omission to exercise arty right or power accruing upon arty default shall impair any such right or power or shall be construed to be a waiver thereof; but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Lessor and Lessee m exercise a~ remedy reserved to it in this section, it shall not be necessary tp give arty notice, other than such notice as may be herein expressly required.14.05 No Waiver of Breach: Lessa~s faihrre or delay in declaring the existence of an event of default by Lessee shall not be construed as a waive thereof, nor shall it be construed so as to waive a ~ lessen the right of the Lessor b insist upon the performance by Lessee of arty term, covenant or condition hereof; or to exercise any rights given it on accourrt of any such event ofdefault A waive of any particular event of default shall not be deemed to be a waive of the same, similar of any other subsequent event of default. 14.06 Expeditious Action. Notwithstmtding any provision as to notice in this Agreement herein contained, if in Lessor's reasonable judgment the continuance of any event of default by Lessee for the full period of the notice to ame the event of default will jeopardize the operation of the Airport or the rights of the Lessor or the other Airport tenants, Lessor may, without rrotice, elect to perform those acts in respect m which Lessee is in default. Lessee shall reimburse Lessor for any reasonable and necessary costs incurred by the Lessor pursuant to this Section 14.06. 14.07 Default in Rent Payment: Notwithstanding anything to the contrary above, if there shouid be any default in the payment by Lessee of any rents, fees or charges due to Lessor as provided herein, the Lessor may give Lessee a ten (10) day written notice to pay all sums then due err cease operations, and if such payment is not made within such ten (10) day period or such longer time as Lessor may set forth, Lessee's rights under the Agreement shall terminate. By so terminating this Agreement the Lessor does not waive any other clartn or rights against Lessee. However, if such monetary default consists only of urderpeyment of a disputed and unliquidated sum, under $1,000.00, the termination of this Ageement may be forestalled by tatder of the liquidated sum and deposit of the amount in controversy in escrow. ARTICLE 15. TERMINATION BY LESSEE Except for the payment by Lessee to Lessor of rents or other amours past due or accxued but not yet due, Lessee shall have the right to terminate this Agraurent in its entirety, and all rights and obligations ensuing there from immediately upon the ocaurence of the following: A. The issuance of any order, rule or regulation of the Federal Aviation Administration, or its successor Federal Agency, or other competent government authority, Federal or State, or the issuance and execution of any judicial process by any court of competent jurisdiction, materially restricting for a period of at least sixty (60) days, the use of the Airport for aeronautical purposes; provided that none of the foregoing is due to any fault of Lessee; or B. The material restriction of the Lessor's operation of the Airport by action of the Federal Government or any department or agency thereof, under its wartime or emergency powers, and the continuance thereof for a period of not less than sixty (60) days; provided however, that without prejudice to the rights of Lessee to terminate as above provided, the Lessor and Lessee may mutually agree to adjust fees and charges; or C. Material restriction of the operation of the Airport arising from Lessor's failure to maintain and keep in repair the landing area of the Airport. If Lessee terminates this Lease far a~ of the reasons set forth in this Article 1 S, Lessor shall promptly repay Lessee any rent previously paid by Lessee attributable to the period following the date of such termination. ARTICLE 16. MISCELLANEOUS PROVLSIONS 16.01 Damaees: LESSEE HEREBY RELEASES CITY. COUNTY, AND THEIR RESPECTIVE OFFICERS. EMPLOYEES. AGENTS AND CONTRACTORS FROM LIABILITY TO LESSEE FOR ANY DAMAGE TO THE PERSONAL PROPERTY OF LESSEE including its siraaft caused by the act of negligence of arty of those hereby released or any other user of the Airport, the bursting, leaking err Homing of any cistern, water closet waste pipe, tank, water, gas, steam or sewer pipe, err oil and/or gas pipelines in, above, upon or about the Leased Premises, the Airport, or any part thereof any heating, gas or electrical device, or vehicle, or atrv flooding or other weather related casualty. 12 16.02 Quiet Enioyment: Upon the performance of the covenartts and ageements on the part of the Lessee to be performed hereunder, the Lessee shall peaceably have and enjoy the Leased Premises, appurtenances, facilities, licenses and privileges granted in this Agreement. 16.03 Force Maieure: Neither the Lesser nor Lessee shall be deemed in violation of this Agreement if it is prevented from performing any of its obligations hereunder except the obligation to pay rent by reason of strikes, boycotts, labor disputes, embargoes, shortages of materials, act of God, acts of the public enemy, act of superior govermnental authority, weather conditions, floods, riots, rebellions, acts of sabotage or any other circumstances for which it is not responsible or which are not in its control. 16.04 No ParhrershiA AQency. Joint Venture: It is mutually understood and agreed that no m this Agreement is intended or shall be construed as in arty way caeating a establishing any partrrership, joint venture, agency, or any other relationship between the Lessor and Lessee other than landbrd and tenant, respectively. 16.05 Inspection by Lessor: Lessor may enter upon the Leased Premises at any reasonable time for any purpose necessary, incidental to or connected wish the performance of Lessor's obligations hereunder, or in the exercise of its governmental functions, for fire pro~ction or security Purposes, or for inspecting or maintaining the Leased Premises, or doing any and all things Lessor is obligated to do, or which may be deemed by Lessor necessary or desirable for the proper conduct and operation of the Airport or the protection of Lessor's int~esis. 16.06 Conformance wig Rules and Regulations: The use of tbe Airport by Lessee shall be subject to any and all nrles, regulations and ordinances which are now in force or which may be hereafter adopted by the Lessor with respect to the operation and use of the Airport, but no such rules, regulations, er ordinances shall increase the Base Rent payable by Lessee under this Lease or otherwise materially and adversely affect Lessee's tenure of the Leased Premises under this Lease. Furthermore, this Agreement and Lessee's use of the Airport shall be subject to any and all applicable lawn ordinances, resolutions, statutes, rules, regulations or orders of any Federal, State or local govermnental authority lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including arty limitatiorrsy restrictions or prohibitions affecting the aviation activities or operations of Lessee. 16.07 Licenses and Permits: Lessee hereby agrees that it shall, at its own expense and cost, procure and obtain all lawfirlly requved licenses and permits, certificates and other authorizations required by any governmental authority, in com-ection with or covering the operations or activities permitted b be performed by it under the provisions of this Agreement. 16.08 Notices: Notices provided for in this Agreanent shall be either hand delivered a sent by certified mail, rehrrn receipt requested, postage prepaid, and properly addressed as follows: If to Lessor: City Manager and Airport Manama 800 Junction Highway Kerrville, Texas 78028 AND County Judge Kerr County Courthouse 700 Main Street Kerrville, Texas 78028 Ifto Lessee: Joseph L. Kennedy Enterprises, Ltd. c/o JLK Management L.L.C. 1875 Airport Loop Road Kerrville, Texas 78028 The parses may change the representative or address for delivery of notices from time to time by sending written notices to the other party. All notices shall be in writing and effective only upon actual receipt. 13 16.09 t,,ovanine Law and Venue: This Agreement and all of the transactions contemplated herein shall be governed by and construed in accordance with the laws of the State of Texas. Venue for any cause of action shall be in a court of cot»petart jurisdiction in Kerr County, Texas. 16.10 Sevaability: If any provision of this Agreement is invalid or unenforceable, this Agreement shall be considered severable as to such provision, and the remainder of this Agreement shall remain valid and binding as though such invalid or unenforceable provision was not included herein. 16.11 Ca lions: Section headings are inserted herein only as a matter of convarience and for reference, and in no way defines, limits or deseribes the scope or intent to any provision herein. 16.12 Use of Laneuaee: Words of any gender used in this Agreem~t shall be held and construed to inchde arty other gender, and wards in the singular shall be held io include the plural, unless the context otherwise requires. 16.13 Counteryarts: This Agreement may be executed in multiple counterparts, each of which shall be deemed as original, and all of which constitute but one and the same instrument. 16.14 Development of the Airport: Future development changes, alterations, modifications or improvement to the Airport shall be at the sole discretion of the Lessor, subject only m such notification m Lessee that the Federal Aviation Administration may dictate. The Lessor will strive not to hinder the Lessee's operations in carrying out the provisions of this paragntph. 16.15 Rek>cation of Facilities: In 8re event Lessor requires arty portion of the Leased Premises for expansion of development of the Airport Lessor reserves, at its sole expense, the right on sac (6) months' notice, to relocate Lessee to substantially similar facilities at another generally comparable site located on the Airport. Lessor reserves the right to retake minor unimproved portions of the Leased Premises, such as will not substantially interfere with the Lessee's improvements ~ operations, without compensation to the Lessee, provided that the rent shall be abated as to that portion of the Leased Premises which is taker back by Lessor. 16.16 Subordination to S1a~ or Federal A~eements: This Agreerrrent shall be subordinate to the provisions and requirements of any existing or future ageement between the Lessor and the United States or the Lessor and the State of Texas relative to the development opaation or maintarance of the Airport. 16.17 No Exclusivity on Aaonautical Services: Nothing herein contained shall be construed to grant or authorize the granting of the exclusive right to provide aeronautical services m the public as prohibited by Section 308(a) of the Federal Aviation Act of 1958, as amerrded. 16.18 Discrimination Prohibited: The Lessee, far itself; its offiars, legal representatives, successors-in- interestand assigns, as a part of the consideration hereof agees (1) that no person on any grounds including race, color, sex, national origin, veteran status or disability shall be excluded from participation in, denied the benefits of or be otherwise subjected to discrimination in Ure use of the Leased Premises; (2} that in the construction of any improvements on, over or ands the Leased Pranises and the famishing of services thereon, no person on the grounds of race, sex, color, national origin, or disability shall be excluded from participation d, daried the benefits of or otherwise be subjected to discrimination; (3) that the Lessee shall use the Leased Pranises and the Airport in compliance with all other requirements imposed by, err pursuant to, Title 49, Cade of Federal Regulations, Department of Transportation, Subtitle A, office of the Secretary, Part 21, Nordiserimination in Federally-Assisted Programs of the Deparhnent of Transportation-Effectuation of Title VI of the Civil Rights Act of 1964, and as said regulations may be amended. In the event of breach of arty of the above nondiscrimination covenants, the Lessor shall give nonce of the alleged breach and state with partiwlarity the basis of, and Ure facts on which, the alleged breach has occurred. Lessee shall have at least thirty (30) days in which to cure said alleged breach by eliminating/ceasing any such breach, or such additional period as may be reasonable and necessary b complete the same. If such alleged breach is not so caned by eliminaling/ceasing arty such breach within such period, Lessor may upon written notice b Lessee terminate this Agreanent. 14 16.19 Entire Agreement This Agreement embodies the entire agreement between the Lessor and Lessee, and supersedes all prior agreements and understandir~s, whether writ~n or oral, and all contemporaneous oral agreements and understandings relating m the subject matter hereof. This Agreement shall not be changed, modified, discharged or extended, except by written instrument duly executed by Lessor and Lessee. The parties agree that no representations or warranties shall be binding upon either party unless expressed in writing in the aforesaid Ageement. SEE ADDENDUM ATTACHED HERETO AND INCORPORATED HEREIN FOR ALL PURPOSES IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be Dally executed in duplicate this day of ,2003. LESSOR: ,JCERRVILLE`KERR COLR~;Tti' AIRPORT BOARD BY~ Artport Board President ~. PrA PROVED_ C_IT~' OF KERRVILLE Stephen P. Fine.. Mayor ATTF,ST: Bn~rlda G. Crain, City Cleric APPROVED r'~S TO__FORAt: Michael C. Hayes, City Attorney LESSEE: JOSEPH L. KENNIDY ENTERPRISES, LTD., a Texas limited partnership By: JLK MANAGEMENT, L.L.C., a Texas limited liability oompsrry ~': Joseph L. Kennedy, Jr., President CO[ITITYnF ItFRI~ TE.\A.S Pat Tm1ey, Counri~ Judge ATTEST: Jannett Pieper, Counri` Clerk __- .APPROVED AS "1'O FUKM: pavid M. Motley, County Attorney 15 Dekbed: CITY OF Deleted: ,TEXAS Dekisd: Stephen P. Fine, Mayor Deleted.• ATTESTi Defeted• Sheila L. Brad, City Clerlc~ Deleted: COUNTY OF I{ERR, TEXA3T Deleted: By: _1 P~ Tinley, County Judge Dekted:ATTEST FOfllgmd: Lldent: Left: -0.19", Hanging: 3.5, Tabs: -1", Left Forte: Indent: Left: 0", Hanging: 391", Tabs: -1", Ldt Deleted: Jacett Pieper, Cou~y C1erk~ 1 APPROVED AS TO FORM: _ _ APPROVED AS TO FORM1 -~ -- Forrrrat~ed:Indent: Left: 0", Hanging: 3.31' Debted: _ THE STATE OF TEXAS § COUNTY OF KERR § This instrument was acknowledged before me on this day of 2003 by President of the Itarvilla-I:err Counri' :Avport Board. for the kE:RRVILLG - __ -- - 1:ERR Cn~i`?Tl'1IRPORT F3011RD,_on behall'of said. IJO.ARD. _. Notary Public, State of Texas THE STATE OF TEXAS S COUNT' OF I~ERR S This instrument was acknowledged before me on this day of 2003 by PAT 'CINLEY'. County Judge, for COUNTI' OF' ILERR TF~AS, on behalf of said COt'N'IY OF 1:ERR TF1 AS Notary Public State of Texas THE STATE OF TINAS S COLI~TY OF IkERR __ ~ This instrument was acknowledged before me on this day of 2003 by STEPHEN P. FINE, Mayor of the CITY OF KERRVII.LE, TEXAS, ao behalf of said CITY OF KERRVILLE, TEXAS. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERB § This inshument was aclQtowtedged before me on this day of ,2003 by JOSEPH L. KENNEDY, JR, President of JLK MANAGEMENT, L.L.C, a Texas limited liability company, General Parbrer of JOSEPH L. KFTINEDY ENTERPRISES, LTD., a Texas limited pattrrership, on behalf of said partncxship. Notry Public, State of Texas ^_. _ __ 16 DeleteA: ~ THE STATE OF TEXAS _ §T 7 COUNTY OF KERR _ §~ 1 _ This instnment was acknowledged before me on this day of ' , 2003 by PAT TINLEY, County ]udgq for COUNTY ~' OF RERR, TEXAS, on behalf of said '. COUNTY OF RERR, TEXAS. 1 ------- ~ _ _ _ _ _ _ _ Notary Publiq State of Texasl Fonnatbed:ltnt#'ted, Indent: Left: 0', Hanging: 3.5', Tabs: -1', Left Formatted: Font: 10 pt COMMERCIAL LEASE AGREEMENT AMONG THE KERRVII,LE-KERB COUNTY AIRPORT BOARD, THE CITY OF KERRVILLE, TEXAS, THE COUNTY OF KERB, TEXAS AND JOSEPH L. KENNEDY ENTERPRISES, LTD., A TEXAS LIMITED PARTNERSHIP THIS LEASE AGREEMENT, made this day of May, 2003, by and among the Kemrille-Kerr County Airport Board, governing board of the Kerrville-Kerr County Airport pursuant to the Texas Municipal Airport Act, Tex. Transportation Code Chapter 22, hereinafter called the "Board,"; the City of Kerrville, Texas, a home Wile municipal corporation, hereinafter called "City"; and the County of Kerr, Texas, a political subdivision of the State of Texas, hereinafter called "Cormty" (Board, City and County sometimes ~llectively referred to as "Lessor"), and Joseph L Kennedy Enterprises, Ltd., a Texas limited partnership, whose principal offices are located in Kerrville, Texas, hereinafter referred to as "Lessee„ RECITALS WHEREAS, the Lessor owns and operates the KemTille-Kerr County Municipal Airport, located in the City of Kerrville, Texas, hereinafter referred to as "Airport", and; WHEREAS, Lessee desires to lease certain Lessor~wned land at the Airport to oorrstrtrct certain improvements and to engage incertainaeronautical-related services to be provided to the public as hereinafter permitted; and NOW, THEREFORE, for and in consideration of the covenants and conditions herein stated, Lessor and Lessee agree as follows: ARTICLE 1. GRANT OF LEASE 1.01 Leased Premises. Lessor agrees to lease to Lessee certain property owned by Lessor located at the Airport and being more particularly descnbed as Lots 9 and 10, and a 0.253 acre portion of Lot 11, as shown on the map recorded in Vohrme 6, Page 331 of the Real Property Records of Ken: County and as indicated on the Leased Premises Map and Extubit A as attached hereto, together with all improvements thereon and fixtures attached thereto, hereinafter being referred to as the "Leased Premises." Lessee shall eonstnrct the improvements on the Southern portion of Lot 9 and within sixty days of the complexion of the constnrction by Lessee of the hangar and related facilities on the Leased Premises, and issuance of a certificate of occvgancy by the City, Lessee shall, at Lessee's sole cost and expense, have the Leased Premises surveyed ("Survey") and shall have this survey recorded among the official property records of Kerr County, Texas. Within 30 days from the date of the completion of the survey, Lessee shall release the North portion of the Leased Premises not occupied by said hangar, related facilities and paving from this Lease. Based upon such survey, Lessor and Lessee shall enter into an arrtendment of this Lease specifying the legal description of the Leased Premises and the rent shall be adjusted based upon the Survey as provided for in Article 3. 1.02 Release of Improvements: Lessee agrees to transfer ownership of the improvements on Lot 10, specifically the building known as the "blue hangar," on June 30, 2015, to Lessor, and further agrees to timely execute arty and all dmrmPnic necessary to accomplish transfer of owrrership of the building to Lessor. 1.03 Easements: This Agreement shall be subject to such easements, rights~f--way, drill sites, or other rights or reservations affecting the Leased Premises which are of record or are clearly visible as of the date of this Agreement. ARTICLE 2. TERM OF AGREEMENT 2.01 Lease Term: This Agreement shall commence at 12:01 a.m. on May _, 2003, and terminate at midnight on May _, 2033, ("the Lease Term") unless terminated earlier pursuant to the provisions of this Agreement. 2.02 Optional Extension of Lease Term: Deleted. 2.03 Holdover of Lessee: If Lessee holds over or remains in possession of the Leased Premises after the termination of this Agreement in the absence of a new lease agreement between the Lessor and Lessee, such continuation beyond the date of termination, or the collection or acceptance of rent, fees and/or other charges by the Lessor, shall not be construed as a renewal or extension of this Agreement, but shall be construed solely as creating a tenancy at will and not for any other term whatsoever. During the term of such tenancy at will, Lessee shall pay to Lessor the fees and charges herein reserved, and Lessee shall be bound by and comply with all the relevant provisions of this Agreement. The Lessor may terminate the tenancy at will by giving Lessee thirty (30) days written notice thereof. ARTICLE 3. RENT 3.01 Amount of Base Rent: Lessee agrees to pay to Lessor rent for the Leased Premises $.10 per square foot per year for the period commencing on the date hereof until and including June 30, 2005, at which time the base rent shall be recalculated and adjusted annually according to the Consumer Price Index as defined under Section 3.02 of this Lease, below. The total rent due by Lessee during this initial period will be modified as follows: within ninety (90) days after the issuance of the certificate of icy for the newly constructed improvements descnbed in Article 5 and Section 1.01 hereof, and recordation of the survey as required in those sections, the rent due will be adjusted to reflect the change in square footage, if airy, resulting from the survey and release of part of Lot 9. The total rent due shall also be adjusted on June 30, 2010, in that the base rent shall continue to be $.10 per square foot per year {as adjusted), but the total rent due shall be increased by $500.00 per month to account for rental value of the improvements existing on Lot 10 on that date. As further consideration for the rental value of the improvements existing on Lot 10, the total rent due shall be increased by $250.00 per year, with said increases occurring on June 30 of 2011, 2012, 2013, and 2014. The rental value for the improvemers existing on Lot 10 on June 30, 2015 shall then be determined by using the base rental rate of $1,800.00 for the improvements on Lot 10 as of the date of execution hereof, as that amount maybe increased or decreased by changes in the Consumer Price Index during the intervening period, using the same methodology specified in 3.02, below. 3.02 Adjustment of Rent During Lease Term: During the Lease Term, the rent price per square foot to be paid by Lessee shall be increased or decreased on each anniversary of the effective date of this Agreement in accordance with changes in the Consumer Price Index for all Urban Consumers (Southern Urban Area) (the "Consumer Price Index") as promulgated by the Bureau of Labor Statistics of the United States Department of Labor, which Consumer Price Index for January 2003 is 175.1(the "Base Index") using the year 1984 as a base of 100. The Base Rent to be paid during the term of this Agreement shall bear the same ratio to the Consumer Price Index for the month of January preceding the date of the rent adjustment, as the original "$.10 per square foot per year" bears to the Base Index. In no event, however, shall the rent due be less than $.10 per square foot per year. In the event the Consumer Price Index ceases to inwrporate a significant number of items, or if a substantial change is made in the method of establishing such Consumer Frice Index, then the Consumer Price Index shall be adjusted to the figure that would have resulted had no change occurred in the manner of computing such Consumer Price Index. In the event such Consumer Price Index (or a successor or substitute index) is not available, a reliable governmental or other nonpartisan publication, evaluating the information thereto for use in determining the Consumer Price Index, shall be used in lieu of such Consumer Price Index. 3.03 Deleted. 3.04 Deleted. 3.05 Deleted. 3.06 Delivery of Rent: All payments required of Lessee by this Agreement shall be delivered by mail, or in persoq to the Oflice of the Director of Public Works, City of Kerrville, Texas, 800 Junction Highway, KemTille, Texas 78028, or to such other location as specified in writing by the Lessor from time to time, no later than the first day of each calendar month of the Lease Term for which the payment is due, unless such due date falls on a Saturday, Sunday, or legal holiday, in which case such rent shall be due on the first City business day following the date such payment is due. 3.07 Delinquent Kent Payments: In the event that payments to the Lessor for rent or other fees or charges are not received by the Lessor on or before the tenth day following the due date, Lessee shall pay a late rental charge of Two Percent (2.0%) of the rent amount due for that month. All rent and other payments which are past drre more than thirty (30) days shall accrue simple interest at the rate of eighteen percent (18.0%) annually or (b) the maximum percentage rate allowed by law, whichever is less. Notwithstanding anything to the contrary in this Section 3.07, if at the time performance of the provisions set forth in this Section 3.07 becomes due the interest to be paid in accordance with this Section 3.07 exceeds the limits on the payrrrerrt of interest established by law, then the amourrt of interest to be paid shall be reduced w the maximum limit allowed by law; furthermore, if, from any circumstances, Lessor should ever receive as interest an amount that would exceed the highest lawful rate, the amount that would be excessive interest shall be applied to the payment of rent owing pursuant to the provisions of this Lease Agreement and not to the payment of interest. 3.08 Application of Amourrts Received: Payments received shall be applied in the following order: (1) interest accnred for late payments, (2) late rental charges, (3) past due rent, beginning with the oldest amount due, (4) other past due ammants, (5) rent currently due, and (6) other amounts currently due. 3.09 Other Charges: Nothing herein shall be deemed to relieve Lessee and its tenants, sublessees, patrons, invitees and others from Airport use charges, including fuel flowage fees paid on fuel purchased by Lessee, as are levied generally by the Lessor directly upon the operation of air+crafl, or from automobile parking permit fees far parhdrrg areas that are not included within the Leased Premises, or from security foes. ARTICLE 4. USE OF LEASID PREMISES 4.01 Permitted Uses: Lessee shall be permitted to use the Leased Premises for the purpose of corrduding for- profit commercial aeronautical services or activities consisting of arty or all of the following operations and no others: See Addendum attached hereto and made a part hereof for all purposes. Such other uses as may be permitted in writing by the Lessor. 4.02 Prohibited Uses: Lessee agrees at all times to comply with the following: A. Lessee shall at no time use, or permit the use of; the Leased Premises in a manner that is contrary to applicable federal, state, ceunty or city laws, orders, ordinances, rules, or regulations, which shall include, but not be limited to, applicable Federal Aviation Administration rules and regulations and applicable regulations for the use of the Airport as may from tune to time be promulgated by the Lessor, B. Lessee shall not permit any permanent, unshielded light or illumination source to cause glare as viewed from any street, adjacent properties or operating aircraft; C. Lessee shall not cause or permit the burial or storage above ground on the Leased Premises of any hazardous waste or materials, as defined by federal or state law, except in accordance with applicable federal, state, county or city laws, orders, ordinances, regulations and rules, as may be adopted or amended from time to time; D. Lessee shall not cause or permit any use or activity on the Leased Premises that would create a hazardous condition for aircraft operating at the Airport; E. Lessee shall not allow the Leased Premises to be used for parking of motor vehicles, motorcycles, or motor driven equipment by anyone other than customers, employees, or contractors of Lessee except as may be authorized by the Director of Public Works, with all such parking being limited to areas designated by Lessor for such parking. Lessee shall not be in default for the improper parking of vehicles over which neither Lessee nor any of its subtenants, customers, employees, or contractors have arty control; F. Lessee shall not allow scheduled airline passenger operations to be conducted on the Leased Premises. G. Lessee shall not permit aircraft to access the Leased Premised from wrtside the Airport property such that such access would constitute a "through the fence' operation prohibited by contracts between Lessor and the State of Texas or the United States of America. 4.03 Compliance with Minimum Standards: All activities conducted upon the Leased Premises, whether by Lessee or its officers, employees, contractors, or agents, shall be in substantial conformance with Title 3, Chapter V, of the Code of Ordinances of the City of Kerrville, Texas, "Airport Rules, Regulations, and Minimum Standards", as such regulations exist or may be duly amended from time to lime by the Lessor to the extent that such regulations apply to Lessee's operations. 4.04 Non~acchrsive Uses: Lessee understands and acknowledges that, as to that part of the Airport not included within the Leased Premises, the allowable uses permitted herein are on a nonexclusive basis with respect to other potential providers of aeronautical services at the Airport. ARTICLE 5. OBLIGATIONS OF LESSEE WITH REGARD TO CONSTRUCTION OF IIyIPROVEMENTS 5.01 Application for Building Permit: Upon execution hereof, Lessee shall make application for a building permit ("Permit") with the appropriate governmental agency on or before 90 days from date hereof for thc construction of the facilities r-ecessary to carry out the purposes described in Section 4.01 above, and shall pursue issuance of such Permit with reasonable diligence. Lessor agrees to cooperate with Lessee in obtaining such Permit. Such facilities to be constructed shall include a harrgar on the southwestern-most portion of Lot Sand aself-fueling deQot. 5.02 Arrx~roval of Constnrc;tion Plans: Not later than 90 days after commencement of the Lease Term and prior to arty construction, alteration, or changes to the Leased Premises, Lessee shall submit to the City's Airport Manager scaled plans and specifications of such construction, and a site use plan with all drainage and utility services as existing or proposed indicated thereon. Lessee is solely responsible for ascertaining the requirements of arty and all, federal, state, or local government agencies with regard to permit and application procedures necessary to obtain final approvals and building permits prior to beginning any construction on the Leased Premises. Lessee shall not commence any oonstruc[ion until it has received prior written approval from the Airport Manager and until the Lessee or the Lessor or both have received the necessary approvals from the Federal Aviation Administration, the City's Building Official, and such other governmental authorities as are necessary for the type of construction contemplated. In those instances in which the Lessor is required to make application for construction or alteration of the Airport due to the Lessor being the 4 holder of the Airport Operating Certificate, the Lessor agrees to promptly and diligently make and prosecute such applications. Once necessary approvals and permit(s) have been obtained, Lessee shall, not later than 180 days after issuance of approval and permit(s), solely and entirely at Lessee's cost, risk and expense, commence to construct, build and erect the Improvements in accordance with the final constnrction plans and specifications hereinabove mentioned. 5.03 Completion Requirements for Self-Fueling_Depot: Lessee agrees to complete installation and establish operation of the self-fueling dot within 180 days from the date hereof. 5.04 A~pmval of Plans Not Assurance of Design Quality: The approval by the Director of Public Works or anyone else acting on behalf of Lessor of airy plans and specifications applies only to the conformity of such plans to the general architectural and operational plan for the Leased Premises and the Airport. The approval of the Director of Public Works does rat constitute approval of the quality of the architectural or engineering work performed. Neither Lessor nor the Director of Public Works assumes any liability or responsibility for the architectural or engineering design or for any defect in arty building or improvement corrstrrrcted from the plans or specifications. Construction of airy contemplated improvements shall be in accordance with the plans presented to and approved by the Director of Public Works. All oonstnrction work shall be subject. to inspection by a representative employed by the Lessor or an inspector from the City's Planning and Development Services Departmem, or both, to determine that such work conforms to the plans and specifications approved by the Lessor. 5.05 Contractor's Insurance; Bonds: At airy time constnrction activities are undertaken on the Leased Premises, Lessee shall require that its contractor or contractors keep in force insurance issued by a responsible insurance company or companies authorized to conduct business in the State of Texas insuring the improvements during oonstrrrction under Completed Builder's All Risk Insurance, including fine, extended coverage, vandalism and malicious mischief in an amormt equal to the full insurable value of such censtrrrction as the same progresses in order to insure continuity of conspuction and ultimate completion despite damage or destruction suffered during the coarse thereof. Furthermore, Lessee shall require all contractors performing oonstnrclion work on the Leased Premises to provide payment and performance bonds issued by a responsible bonding oompa~ or companies authorized to conduct business in the State of Texas for the fith amount of the cost of the oonstrtrcUion to be performed on forms which are in compliance with Chapter 2253 of the Texas Government Code, as amended. The foregoing shall be made a part of arty contract between Lessee and its contractor or contractors. In the event Lessee does arty construction work itself, it shall comply with the all-risk insurance provisions hereof. 5.06 Compliance With Building Codes and Federal Standards: All improvements made to the Leased Premises by Lessee shall comply with all applicable City Building Codes and Federal standards for oonstrryction of airport improvements in effect at the time oomstrirction commences as well as all other applicable federal aviation regulations, if arry. 5.07 Encumbrance of Leasehold Estate: Lessee may encumber its leasehold interest in the Leased Premises by deed of trust, mortgage, security agreement or other security interest without the prior written consent of the Lessor as set forth in the Adderxhrm attached hereto. 5.08 Ownership of Building~_Improvements and Fixtures: Arry and all buildings, improvements (including, but not limited to all aprons, taxiways and roadways), additions, alterations, and fixtures existing on the Commencement Date or oorrstnrcted or placed on a~ part of the Leased Premises during the Lease Term by Lessor or Lessee, shall be considered part of the real property of the Leased Premises, shall remain on the Leased Premises, and shall not be removed by Lessee or arty sublessee without the written consent of Lessor. Except as otherwise provided in this Lease or an Addendum hereto, improvements, additions, alterations, and fixtures on the Leased Premises shall become the sale property of Lessor upon termination of this Agreement without compensation to Lessee, it being understood and agreed by Lessee that the transfer of title to the Lessor of the buildings and improvements located on the Leased Premises at the end of the Lease Term is additional consideration for this Agreerrrerrt. Notwithstanding the above, Lessee shall have the right at arty time during Lessee's occupancy of the Leased Premises, or within a reasonable time thereafter, to remove arty and all firrniture, machinery, equipment, or other trade fixtures, owned or placed by Lessee, in, under, or on the Leased Premises; provided, however, prior to the termination of the Lease Term, Lessee shall repair any damage to arty buildings or improvements on the Leased Premises resulting from their rernoval. Arty such personal property items or trade fixtures which are not removed within sixty (60) days after the termination date of this Agreement shall become the property of Lessor as of that date. 5.09 Failure to Construct Improvements: Lessor shall have the right, exercisable at its sole option, to terminate this Lease Agreement if: A. Lessee fails to commence constnrction of the improvements required to conduct Lessee's operations on the Leased Premises on or before the 180th day after commencement of the Lease Term; or B. after oonstnrction of the required improvements has commenced, Lessee fails to complete construction of the improvements on or before the second anniversary of commerroement of construction. 5.10 Availability of Sanitary Sewer: Lessee understands and acknowledges that the Leased Premises is not served with sanitary sewer service as of the commencement of the Lease Term. Lessee shall be solely responsible for installing and mainta;nin~ at Lessee's cost an on-site sewage facility that complies with all applicable state and local regulations with sufficient capacity to provide sanitary sewer disposal for Lessee. If City extends a sanitary sewer collection main adjacent to the Leased Premises, Lessee agrees it will constnrct a sanitary sewer service line to connect to the sanitary sewer collection main not later than 180 days after receiving written notific~rion from Lessor that the sanitary sewer collection main is complete and ready to receive waste. If Lessee has constructed its facilities and is operational at the time of the extension of sanitary sewer service to the Leased Premises, Lessee shall not be required to pay a capital recovery fee to the City as otherwise required by ordinance upon conrrection to City's sanitary sewer system. 5.11 Disc to Sanitary Sewer, Pne-trea~ent: Lessee shall at no tirne discharge or allow the discharge of a~ substance into City's sanitary sewer system that is otherwise prohibited by federal, state, or local Iaw, ordinance, or regulation. Tn the event that pre-treatment of waste is required prior to the discharge into the City's sanitary sewer system of waste generated from the Leased Premises, Lessee must construct such pre-treatrent facility at its sole expense in compliance with applicable federal, state, and local laws and regulations. ARTICLE 6. REPAIRS. MAINTENANCE AND RESTORATION 6.01 Maintenance Lessor: Lessor shall, at Lessor's sole expense, keep in good repair, condition and appearance the taxiways and roadways which have been or may be constructed by Lessor. Lessor shall commence required repairs as soon as reasonably practicable after receiving written notice from Lessee thereof. 6.02 Maintenance Lessee: Lessee shall, at Lessee's sole expense, keep the Leased Premises and all improvements of any kind, which may be existing at the commencement of the Lease Term or erected, installed, or made thereon by Lessee after commencement of the Lease Term, not required herein to be maintained by Lessor in good repair, condition and appearance. Lessor shall be the sole judge of the quality of Lessee's maintenance; provided, however, Lessor shall not unreasonably withhold acceptance of said repairs or maintenance. Upon written notice by Lessor to Lessee, Lessee shall be required to perform such reasonable maintenance under this Section 6.02 as Lessor considers necessary. If Lessee does not undertake such maintenance within ten (10) days after receipt of written notice, Lessor shall have the right to enter on the Leased Premises and perform the necessary maintenance, the cost of which shall be borne by Lessee. Subject to the provisions of Section 5.07, on the last day of the Lease Term, or on arty sooner termination, Lessee shall surrender the Leased Premises to Lessor in the same condition as received and clean and frce of debris, except for fire and casualty damages or ordinary wear and tear. 6.03 Trash and Waste Removal: Lessee agrees to cause to be removed from the Leased Premises, at its own expense, all waste, gathage and rubbish, and agrees not to deposit same on the Leased Premises except temporarily in waste or garbage containers provided by Lessee at Lessee's expense. Lessee further agrees that Lessee will store all parts, supplies, and other materials on the interior of buildings located on the Leased Premises, provided, however, that any parts or supplies which must be kept outside because of volatility of the supply item or the size of the part will be kept out of view of the public traveling on public rights of way or other surrounding tenants by installation of fencing or other means of screening approved by the Airport Manager. ARTICLE 7. ACCESS TO AND USE OF AIRPORT 7.01 Access to Airport: Lessor shall maintain all roads on the Airport giving access to the Leased Premises in good and adequate condition for use by cars and trucks and shall maintain fi~ee and unintemrpted access to the Leased Premises over said roads at all times; provided, however, Lessor shall not be in default of this Agreement if access is interrupted for arty the reasons set forth in Section 16.03, below. 7.02 Right to Use Airport: Lessee and Lessee's officers, employees, agents, contractors, invitees, and guests shall have the right to use that part of the Airport and its facilities not included within the Leased Premises in common with others authorized to do so. Such use shall be subject to arty and all applicable federal, state or local laws, ordinances, statutes, rules, regulations, or orders of arty governmental authority, lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including arty limitations, restrictions or prohibitions affecting the aviation activities or operations of Lessee. 7.03 Vehicular Operations on the Airfield: No vehicles of Lessee, its officers, employees, agents, centractors, invitees, and guests will be operated on, or cross, the runways of the Airport except pursuant to the Airport Rules and Regulations. 7.04 Airport Certification Rules arrd Regulations: Lessee shall comply with such rules that pertain to its operation on the Airport under the Airport Certifications Rules of Federal Aviation Regulations fart 139, as amended [ 14 CFR fart 139, as amended], to the extent such regulations are applicable to the operation of the Airport. 7.05 Airport Security Rules and Re lations: Lessee, its officers, employees, agents, contractors, im~itees, and guests shall cemply with all federal and local Airport Secruity Regulations adopted by the Lessor as such rules and regulations exist or may hereafter be amended. LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS THE LESSOR ITS OFFICERS AND EMPLOYEES from arty charges, fines or penalties that may be assessed or levied by the FAA or the Texas Department of Transportation lry reason of the NEGLIGENT OR INTENTIONAL FAILURE OF LESSEE ITS OFFICERS EMPLOYEES AGENTS CONTRACTORS INVITEES AND GUESTS to comply with such Airport Socurity Regulations. 7.06 14 C.F.R Part 77 Requirements: Lessee agrees to comply with the notification and review requirements set forth in Part 77 of the Federal Aviation Regulations [14 CFR Part 77] in the event any future structure, antenna or building is planned for the Leased Premises, or in the event of arty planned modification of arty present or firture building, antenna or stnrctrrre located on the Leased Premises. 7.07 Control of SUuctures: Lessee shall Trot erect nor permit the erection of arty structure or object, nor permit the growth of arty tree on the Leased Premises which highest point is above a mean sea level elevation established by the FAA and Lessor as a height limitation on such structures or objects. Lessor reserves the right to enter upon the Leased Premises and to remove the offending sbnrcture or object and cut the offending tree at Lessee's expense. 7.08 Aerial Appro~hes: Lessor reserves the right to take arty action it considers necessary to protect the aerial approaches of the Airport against obstnrction together with the right to prevent Lessee from erecting or permitting to be 7 erected any building or other sfructute on or adjacent to the Airport which, in the opinion of the Lessor, would limit the usefulness of the Airport or constitute a hazard to aircraft. 7.09 12i~ht of Overflight: There is hereby reserved to the Lessor, for the use and benefit of the public, a right of flight for the passage of aircraft, abovc the surface of the Leased Premises, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft, now known or hereafter used for navigation of or flight in the air, using said airspace for landing at, taking off from or operating on the Airport. ARTICLE 8. INSURANCE 8.01 Lessee's Minimum Insurance Amounts: Lessee shall obtain and maintain continuously in effect at all times during the Lease Term, at Lessee's sole expense, at least the following minimum insurance with a carrier or carriers licensed to do business in the State of Texas and satisfactory to the Lessor: A. Commercial General Liability Insurance against claims for bodily injury, death, or property damage occurring on, in or about the Leased Premises, or any other portion of the Airport, in at least the amount of $1,000,000.00 per individual, $2,000,000.00 per occurrence and $1,000,000.00 with respect to property damage. In the event that the Texas Torts Claims Act, as amended (Tex. Civ. Prac. & Rem. Code §101.001, et seq.) or its successor statute, is amended to increase the amount of liability of municipalities for acts described in said Act above the levels set forth in this Section 8.O1.A, Lessee agrees to increase the amount of insurance coverage required by this Section 8.O1.A. to an amount sufficient to provide coverage to the level of potential liability per occurrence under said Act; and B. Automobile Liability Coverage on all motor vehicles owned and/or operated by Lessee or its employees on the Leased Premises or other Airport property in amounts of not less that $500,000.00 combined single limit or equivalent; provided, however, separate automobile coverage shall not be required if such coverage is provided under Lessee's comprehensive general liability policy. C. Property and Casualty Insurance on improvements constructed on the property, whether owned by Lessee or Lessor, insuring against loss or damage to improvements due to fire, lightning and all other perils included in standard extended coverage policies, and vandalism and malicious mischief, all in amounts of not less than ninety percent (90%) of replacement value; D. If required pursuant to Article 3-V-10(a.)(2} of the Code of Ordinances of the City of Kerrville or its successor ordinance, Hangarkeeper's Liability coverage in the minimum amount of $1,000,000.00 per occurrence unless similar coverage exists under the required general liability policy; E. Environmental Liability Coverage in the amount of not less than $1,000,000.00 per occurrence. 8.02 Lessee's Coverage Primary: All insurance herein required shall apply as primary and not in excess of or wntributing with other instrranoe which the Lessee may carry. Insurance provided pursuant to Section 8.01 shall name the Lessor as an additional insured or loss payee as the case may be. The comprehensive general liability policy as provided in paragraph 8.O1.A. shall provide contractual liability coverage sufficiently broad so as to include the liability assumed by Lessee in the indemnity and hold harmless provisions included in Article 9 of this Agreement. 8.03 Contents of General Liability Policy: Lessee's Comprehensive General Liability policy shall pmtect the Lessor and Lessee against arty and all liability to any person or persons whose property damage or personal injury arises out of or is in conrrection with the oo~vpation, use, or condition of the Leased Premises or resulting from arty injury or 8 damage occurring on or about the roads, driveways or other public areas of the Leased Premises used by Lessee, its officers, employees, agents, contractors, invitees, and guests at the Airport, whether or not such damage or injury is the result of negligence of the Lessee or its officers, employees, agents, contractors, invitees, and guests. 8.04 Cancellation; Certificates of Insurance: Lessee's inc~irance as required by this Agreement shall not be subject to cancellation or material alteration until at least thirty (30) days written notice has been provided to the Lessor. Lessee shall famish to the Lessor, annually, Certificates of Insurance showing Lessor as an additional insured and evidencing that all of the herein stated requirements have been met 8.05 Lessor's Right to Purchase Insurance: In the event such insurance as required by Section 8.01, above, shall lapse, the Lessor reserves the right to obtain such insurance at Lessee's expense. Upon demand from Lessor, Lessee shall reimburse Lessor for the full amount of the premium paid on Lessee's behalf. ARTICLE 9 INDENIl~TTI'Y 9.01 Generally: LESSEE AGREES TO INDEMNIFY DEFEND AND HOLD HARMLESS THE CITY COUNTY, AND THEIR RESPECTIVE OFFICERS. EMPLOYEES AND AGENTS from and against any and all loss, damage, liability, claims, demands, costs, charges, expenses and causes of action including all costs of defense thereof (and including reasonable attorney fees) of whatsoever character which the Lessor may incur, sustain, or be subjected to on aceount of loss, damage to property and loss thereof and for bodily injury to or death of a~ persons (including but not limited to the property, employees, customers, contradors, agents, invitees and licensees of each party hereto) ARISING OUT OF THE CONDUCT OR OPERATIONS NEGLIGENT OR OTHERWISE OF LESSEE TI'S DIRECTORS OFFICERS EMPLOYEES SUBLESSEES CONTRACTORS SUBCONTRACTORS OR AGENTS on the Leased Premises. The Lessor will give Lessee prompt nofice of arty claim made or suit instituted which in arty way affects or might affect the Lessor. Similarly, Lessee will accord the Lessor the same notice and rights. 9.02 Environmental Matters: LESSEE AGREES TO INDEMNIFY, DEFII~ID, AND HOLD HARNII.ESS CITY COUNTY AND THEIR RESPECTIVE OFFICERS EMPLOYEES, AND AGENTS from and against arty loss, costs, damages, claims, assessn-erits, fines, and/or penalties (including reasonable attorney's fees) (together referred to as "Losses") which may be incurred by or levied against ANY OF THOSE HEREIN INDEMNIFIED BY ANY THIRD PARTY INCLUDING BUT NOT LIlyIITED TO THE U.S. ENVIRONMENTAL PROTECTION AGENCY OR THE TEXAS NATURAL RESOURCES CONSERVATION COMMISSION OR THEIR SUCCESSOR AGENCIES as the result of Lessee's constnictioq operation, or maintenance of arty aircraft painting and refinishing facility on the Leased Premises. As used in this Section 9.02, the term Losses shall include, but not be limited to, arty losses, costs, damages, claims, assessments, fines or penalties, including but not limited to cost of remediation, resulting from the carrtamination of arty soil, water, or air by hazardous materials discharged by Lessee, or by Lessee's officers, employees, agents, sublessees, invitees, licensees, guests, trespassers, or contractors, either intentionally or negligently, into the soil, water, or air. ARTICLE 10. UTILITIES Lessee shall be solely responsible for the payment of all electric, telephone, water, refuse, natural gas and other public utility services used on the Leased Premises. ARTICLE 11. SIGNS 11.01 Consent Required: Except with the prior written consent of the Airport Manager, which shall not be unreasonably withheld, Lessee shall not erect, maintain or display arty signs or a~ advertising at, or oq the exterior part of structures on the Leased Premises, or inside arty buildings located on the Leased Premises so as to be visible through the window or exterior doors thereof. 11.02 Removal on Termination: Upon the termination of this Agreement, Lessee shall remove, obliterate or paint out, as the Lessor may direct, arty and all signs and advertising on the Leased Premises or elsewhere at the Airport, and in connection therewith shall restore the Leased Premises to the same condition as prior to the placement of arty such signs or advertising. In the event that there is a failure by Lessee to so remove, obliterate or paint out each and every sign or advertising and so to restore the Leased Premises, the Lessor may, at its option, perform the necessary work at the expense of Lessee, aced the charge therefor shall be paid by Lessee to the Lessor on demand. In certain cimciimstarices, the Lessor may elect to allow specific signs to remain at the termination of this Agreement. Such signs shall be identified and agreed upon mirdially, in writing, by Lessee and Lessor. ARTICLE 12. ASSIGNMENT AND SUBLEASING 12.01 Assignn~nt by Lessee: At no time shall Lessee sublease arty portion of the Leased Premises or assign its interests or obligations in this Lease Agreement without the written consent of Lessor. Any such assignment or attempted assignment without Lessor's consent to same shall be void. 12.02 Assignment by Lessor: Lessor may transfer and assign this Agreement to arty successor in interest of Lessor to whom the Airport may be sold or assigned; provided that the successor in interest shall execute and deliver to Lessor, with Dopy to Lessee, an instrument assuming the lawful obligations of Lessor under this Agreerrient. ARTICLE 13. TAX LIENS Lessee shall be solely responsible for the collection and payment of all applicable federal, state, and local taxes, including, but not limited to, sales, use, fuel, amusement, or excise tax required to be collected and paid over by Lessee to the appropriate taxing authority. Furtlierrnore, Lessee shall be responsible for the payment of a~ applicable ad valorem taxes and any taxes on Lessee's personal property located on the Leased Premises. Lessee shall at no time permit the foreclosure of arty tax liens to Lessee's leasehold interest in the Leased Premises or the buildings, fixtures, or other improvements located on the Leased Premises. The Lessor shall leave the right to pay such taxes due after Lessee's refusal to pay such taxes, and upon demand Lessee shall reimburse the Lessor for the amount of taxes paid plus arty penalties, interests, and attorney's fees incurred, subject to Lessee's right to challenge the validity of such taxes in whole or in part. In the event that Lessee is succesdul in arty challenge regarding the payrrierit of any tax, the Lessor shall be subrogated to any recovery obtained by Lessee to the extent of the amount of taxes, interests, penalties, and attorneys fees previously paid by the Lessor and not ah~eady reimbursed by Lessee. ARTICLE 14. DEFAULT AND REMEDIES 14.01 Default b~I.essce: The following shall be deemed to be events of default by Lessee under this Agreement: A. Lessee shall fail to pay when due any installment of rent or any other payment required pursuant to this Agreement; B. Lessee shall abandon any substantial portion of the Leased Premises; 10 C. Lessee or any guarantor of Lessee's obligations hereunder shall file a petition or be adjudged bankrupt or insolvent under airy applicable federal or state bankruptcy or insolvency law or admit that it cannot meet its financial obligations as they become due, or a receiver or trustee shall be appointed for all or substantially all of the assets of Lessee or any guarantor of Lessee's obligations hereunder; D. Lessee or any guarantor of Lessee's obligations hereunder shall make a transfer in fraud of creditors or shall make an assignment for the benefit of creditors; E. Lessen shall do or permit to be done any act that results in a lien being filed against the Leased Premises; F. The liquidatioq termination, dissolution of Lessee or any guarantor of Lessee's obligations hereunder; or G. Lessee shall be in noncompliance with any other term, provision or covenant of this Agreement, other than those specified in subparts A. through F. above. 14.02 Termination Upon Lessee's Default: Except, for an event of default resulting from the filing of a petition in bankruptcy, if an event of default by Lessee shall continue for ten (10) days after service of notice of such event of default by Lessor to Lessee, Lessor may give notice of its election to terminate this Agrcement, and thirty (30) days after service of such notice of election to terminate, this Agreement shall cease and terminate as if the day of Lessor's election were the day originally fixed for termination of this Agreement. Such election to terminate by Lessor shall not be constared as a waiver of any claim it may have against the Lessee consistent with such termination. If, however, the event of default is of such nature that it cannot reasonably be remedied within ten (10) days after receipt of notice by Lessee, and if the Lessee shall have commenced curing such event of default within ten (10) days after receipt of such notice, and shall continuously and diligently proceed in good faith to cure such event of default, then the period for curing the event of default shall be exter~ed for such length of time as is reasonably necessary to cure the event of default Furthermore, if the event of default is the res,ilt of Lessee filing a petition in bankruptcy, then termination shall not occur unless the trustee in bankruptcy has failed to ratify this lease within sixty (60) days following the date of filing of the petition in bankruptcy. 14.03 Abandonment of Business by Lessee: Lessee further agrees that the abandonment for a period of thirty (30) days by Lessee of the oondrxt of its business activities at the Airport shall terminate Lessee's rights under this Agreement By so terminating this Agreement, Lessor does not waive arty other claim or rights against Lessee. For the purpose,~s of this paragraph, the term "abandonment" shall mean the failure of Lessee to be open for business on the Leased Premises except in the Case of war, strike, catastrophe or causes beyond Lessee's control. 14.04 No Remedy Exclusive: No remedy herein conferred upon or reserved to the Lessor or Lessee is intended to be exclusive of arty other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agceernent or hereafter existing under law or in equity. No delay or omission to exercise arty right or power accruing upon arty default shall impair arty such right or power or shall be oonstnred to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient In order to entitle the Lessor and Lessee to exercise arty remedy reserved to it in this sectioq it shall not be necessary to give arty notice, other than such notice as may be herein expressly required.14.05 No Waiver of Breach: Lessor's failure or delay in declaring the exigence of an event of defauh by Lessee shall not be construed as a waiver thereof, nor shall it be construed so as to waive or to lessen the right of the Lessor to insist upon the performance by Lessee of arty term, covenant or condition hereof; or to exercise arty rights grven it on account of arty such event of default. A waiver of arty particular event of default shall not be deemed to be a waiver of the same, similar of a~ other srrbsegrrerrt event of default 11 14.06 Expeditious Action. Notwithstanding arty provision as to notice in this Agreement herein contained, if in Lessor's reasonable judgmern the continuance of any event of default by Lessee for the full period of the notice to cure the event of default will jeopardize the operation of the Airport or the rights of the Lessor or the other Airport tenants, Lessor may, without notice, elect to perform those acts in respect to which Lessee is in default. Lessee shall reimburse Lessor for any reasonable and necessary costs incurred by the Lessor pursuant to this Section 14.06. 14.07 Default in Rent Payment: Notwithstanding anything to the contrary above, if there should be arty default in the payment by Lessee of arty rents, fees or charges due to Lessor as provided herein, the Lessor may give Lessee a ten (10) day written notice to pay all sums then due or cease operations, and if such payment is not made within such ten (10) day period or such longer time as Lessor may set forth, Lessee's rights under the Agreement shall terminate. By so terminating this Agreement, the Lessor does not waive arty other claim or rights against Lessee. However, if such monetary default consists only of uncbarpayrr-ent of a disputed and unliquidated sum, under $1,000.00, the termination of this Agreement may be forestalled by tender of the liquidated sum and deposit of the amount in oontraversy in escrow. ARTICLE 15. TERMINATION BY LESSEE Except for the payment by Lessee to Lessor of rents or other amounts past due or accrued but not yet due, Lessee shall have the right to terminate this Agreement in its entirety, and all rights and obligations ensuing there from immediately upon the occurrence of the following: A. The issuance of any order, rule or regulation of the Federal Aviation Administration, or its successor Federal Agency, yr other competent government authority, Federal or State, or the issuance and execution of any judicial process by arty court of competent jurisdiction, materially restricting for a period of at least sixty (60) days, the use of the Airport for aeronautical purposes; provided that none of the foregoing is due to any fault of Lessee; or B. The material restriction of the Lessor's operation of the Airport by action of the Federal Government, or any department or agency thereof, under its wartime or emergency powers, and the continuance thereof for a period of not less than sixty (60) days; provided however, that without prejudice to the rights of Lessee to terminate as above provided, the Lessor and Lessee may mutually agree to adjust fees and charges; or C. Material restriction of the operation of the Airport arising from Lessor's failure to maintain and keep in repair the landing area of the Airport. If Lessee terminates this Lease for arty of the reasons set forth in this Article 15, Lessor shall promptly repay Lessee arty Went previously paid by Lessee attn~butable to the period following the date of such germination. ARTICLE 16. MISCELLANEOUS PROVISIONS 16.01 Damages: LESSEE HEREBY RELEASES CITY. COUNTY, AND THEIl2 RESPECTIVE OFFICERS EMPLOYEES AGENTS AND CONTRACTORS FROM LIABILITY TO LESSEE FOR ANY DAMAGE TO THE PERSONAL PROPERTY OF LESSEE including its aircraft, caused by tbe ad of negligence of arty of those hereby released or arty other user of the Airport, the bursting, leaking or running of arty cistern, water closet, waste pipe, tank, water, gas, steam or sewer pipe, or oil and/or gas pipelines in. above, upon or about the Leased Premises, the Airport, or arty part thereof, arty heating, gas or electrical device, or vehicle, or arty flooding or other weather related c~ralty. 12 16.02 Quiet Eniovment: Upon the performance of the covenants and agreements on the part of the Lessee to be performed hereunder, the Lessee shall peaceably have and enjoy the Leased Premises, appurtenances, facilities, licenses and privileges granted in this Agreement. 16.03 Force Majeure: Neither the Lessor nor Lessee shall be deemed in violation of this Agreement if it is prevented from performing arty of its obligations hereunder except the obligation to pay rent by reason of strikes, boycetts, labor disputes, embargoes, shortages of materials, act of God, acts of the public enemy, act of superior governmental authority, weather conditions, floods, riots, rebellions, acts of sabotage or airy other circumstances for which it is not responsible or which are not in its control. 16.04 No Partnership, Agency, Joint Venture: It is mutually understood and agreed that nothing in this Agreement is intended or shall be corrstnred as in arty way creating or establishing airy partnership, joint venture, agency, or airy other relationship between the Lessor and Lessee other than landlord and tenant, respectively. 16.05 htispection by Lessor: Lessor may enter upon the Leased Premises at arty reasonable time for airy purpose necessary, incidental to or connected with the performance of Lessor's obligations hereunder, or in the exercise of its governrental functions, for fire protection or security purposes, or for inspecting or maintaining the Leased Premises, or doing any and all things Lessor is obligated to do, or which may be deemed by Lessor recessary or desirable for the proper conduct and operation of the Airport or the protection of Lessor's interests. 16.06 Conformance with Rules and Re bons: The use of the Airport by Lessee shall be subject to arty and all rules, regulations and ordinances which are now in force or which may be hereafter adopted by the Lessor with respect to the operation and use of the Airport, but no sceh Hiles, regulations, or ordinances shall increase the Base Rent payable by Lessee under this Lease or otherwise materially and adversely affect Lessee's tenure of the Leased Premises under this Lease. Furthenrrore, this Agreement and Lessee's use of the Airport shall be subject to arty and all applicable laws, ordinances, resohrtions, statutes, rules, regulations or orders of arty Federal, State or local governmental authority lawfully exercising jurisdiction over the Airport or the activities and business operations of Lessee, including arty limitations, restrictions or prohrbitions affecting the aviation activities or operations of Lessee. 16.07 Licenses and Permits: Lessee hereby agrees that it shall, at its own expense arrd cost, procure and obtain all lawfully required licenses and permits, certificates and other authorizations regained by any governmental authority, in oomrection with or covering the operations or activities permitted to be performed by it under the provisions of this Agreement 16.08 Notices: Notices provided for in this Agreement shall be either hand delivered or sent by certified mail, return receipt requested, postage prepaid, and properly addressed as follows: If to Lessor: City Manager and Airport Manager 800 Junction Highway Kerrville, Texas 78028 AND County Judge Kerr County Courthouse 700 Main Street Ken:ille, Texas 78028 ff to Lessee: Joseph L. Kennedy Enterprises, Ltd. c!o JLK Management L.L.C. 1875 Airport Loop Road Kerrville, Texas 78028 The parties may change the representative or address for delivery of notices from time to time by sending written notices to the other party. All notices shall be in writing and effective only upon actual receipt. 13 16.09 Governing Law and Venue: This Agreement and all of the transactions contemplated herein shall be governed by and construed in accordance with the laws of the State of Texas. Venue for arty cause of action shall be in a wort of competent jurisdiction in Kerr County, Texas. 16.10 Severability: If arty provision of this Agreement is im~alid or unenforceable, this Agreement shall be wnsidered severable as to such provision, and the remainder of this Agreement shall remain valid and binding as though such invalid or unenforceable provision were not included herein. 16.11 Captions: Section headings are inserted herein only as a matter of wrrvenience and for reference, and in no way defines, limits or describes the swpe or intent to arty provision herein. 16.12 Use of Lang aye: Words of arty gender used in this Agreement shall be held and construed to include any other gender, and words in the singular shall be held to include the plural, unless the wntext otherwise requires. 16.13 Counterparts: This Agreement may be executed in multiple counterparts, each of which shall be deemed as original, and all of which wnslitute but one arxi the same instrument. 16.14 Development of the Airport: Future development, changes, alterations, modifications or improvement to the Airport shall be at the sole discretion of the Lessor, subject only to such notification to Lessee that the Federal Aviation Administration may dictate. The Lessor will strive not to hinder the Lessee's operations in carrying out the provisions of this paragraph. 16.15 Relocation of Facilities: In the event Lessor requires arty portion of the Leased Premises for expansion or development of the Airport, Lessor reserves, at its sole expense, the right, on six (6) months' notice, to relocate Lessee to substantially similar facilities at another generally comparable site located on the Airport. Lessor reserves the right to retake minor unimproved portions of the Leased Premises, such as will not substantially interfere with the Lessee's improvements or operations, without wmpensation to the Lessee, provided that the rent shall be abated as to that portion of the Leased Premises which is taken back by Lessor. 16.16 Subordination to State or Federal Agreements: This Agreement shall be subordinate to the provisions and requirements of arty existing or future agreement between the Lessor and the United States or the Lessor and the State of Texas, relative to the development, operation or maintenance of the Airport. 16.17 No Exclusivity on Aeronautical Services: Nothing herein wntained shall be wnstnred to grant or authorize the granting of the exclusive right to provide aeronautical services to the public as prohibited by Section 308(a) of the Federal Aviation Act of 1958, as amended. 16.18 Discrimination Prohibited: The Lessee, for itself, its officers, legal representatives, successors-in- interest and assigns, as a part of the wnsideration hereof, agrees (1) that no person on arty grounds including race, wlor, sex, national origin, veteran status or disability shall be excluded from participation in, denied the benefits of or be otherwise subjected to discrimination in the use of the Leased Premises; (2) that in the wnstruction of arty improvements on, over or under the Leased Premises and the furnishing of services thereon, no person on the grounds of race, sex, color, national origin, or disability shall be excluded from participation th, denied the benefits of or otherwise be subjected to discrimination; (3) that the Lessee shall use the Leased Premises and the Airport in wmpliance with all other requirements imposed by, or pursuant to, Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, office of the Secretary, Part 21, Nondiscrimination in Federally-Assisted Programs of the Department of Transportation-Effectuation of Title VI of the Civil Rights Ad of 1964, and as said regulations may be amended In the event of breach of arty of the above nondiscrimination covenants, the Lessor shall give notice of the alleged breach and state with particularity the basis oi; and the fads on which, the alleged breach has oocvrred. Lessee shall have at least thirty (30) days in which to cure said alleged breach by ehiminatinglceasing arty such breach, or such additional period as may be reasonable and necessary to wmplete the same. If such alleged breach is not so cured by eliminating/oeasing arty such breach within such period, Lessor may upon written notice to Lessee terminate this Agreement. 14 16.19 Entire Ate: This Agreement embodies the entire agreement between the Lessor and Lessee, and supersedes all prior agreements and understandings, whether written or oral, and all contemporaneous oral agreements and understandings relating to the subject matter hereof. This Agreement shall not be changed, modified, discharged or extended, except by written instrument duly executed by Lessor and Lessee. The parties agree that no representations or warranties shall be binding upon either party unless expressed in writing in the aforesaid Agreement. SEE ADDENDUM ATTACHED HERETO AND INCORPORATED HEREIN FOR ALL PURPOSES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be legally executed in duplicate this day of , 2003. LESSOR: LESSEE: KERRVn .i .F I~RR COUNTY AIRPORT BOARD By: Dr. John Davis, Chair, Airport Board JOSEPH L. KENNIDY ENTIItPRISES, LTD., a Texas limited partnership By: JLK MANAGEMENT, L.L.C., a Texas limited liability company By: APPROVED: CITY OF KERRVn .i .R BY Stephen P. Fine,. Mayor ATTEST: Brenda G. Craig, City Clerk APPROVID AS TO FORM: Michael C. Hayes, City Attorney Joseph L. Kennedy, Jr., President COUNTY OF KERB, TEXAS BY Pat Tinley, County Judge ATTEST: Jannett Pieper, County Clerk APPROVID AS TO FORM: David M. Motley, County Attorney 15 THE STATE OF TEXAS § COUNTY OF KERB § This instrument was aclmowledged before me on this day of 2003 by Dr. John Davis, Chair, Kerrville-Kerr County Airport Board, for the KERRVILLE I~RR COUNTY AIItPORT BOARD, on behalf of said BOARD. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERR § This instrument was acknowledged before me on this day of , 2003 by PAT TINLEY, County Judge, for COUNTY OF KERB TEXAS, on behalf of said COUNTY OF KERB, TEXAS. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERR § This instrument was acknowledged before me on this day of 2003 by STEPHEN P. FINE, Mayor of the CITY OF KERRVILLE, TEXAS, on behalf of said CITY OF KERRVII.LE, TEXAS. Notary Public, State of Texas THE STATE OF TEXAS § COUNTY OF KERR § This instrument was acknowledged before me on this day of 2003 by JOSEPH L. KENNIDY, JR., President of JLK MANAGEMENT, L.L.C., a Texas limited liability company, General Partner of JOSEPH L. KENNIDY ENTERPRISES, LTD., a Texas limited partnership, on behalf of said partnership. Notary Public, State of Texas 16